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Revolving credit outstanding of $1 trillion, spread over 117.72 million households, would amount to $8,300 per household. But many households do not carry interest-bearing credit card debt; they pay their cards off in full every month. Finance charges are concentrated on households that use this form of debt to finance their spending and that cannot pay off their balances every month. Many of these households are already strung out and are among the least able to afford higher interest payments. Consumer credit bureau TransUnion shed some light on this in its Q3 2017 Industry Insights Report, according to which 195.9 million consumers had a revolving credit balance at the end of Q3, with total account balances of $1.35 trillion. This equals $6,892 per person with revolving credit balances.

If there are two people with balances in a household, this would amount to nearly $14,000 of this high-cost debt. If the average interest rate on this debt is 20%, credit-cart interest payments alone add $233 a month to their household expenditures. What is next for these folks? For now, the Fed has penciled in, and economists expect, three hikes next year. But recent developments – particularly the expected tax cuts and what the Fed calls “elevated asset prices” – suggest that the Fed might “surprise” the markets with its hawkishness in 2018. The Fed is currently pegging the “neutral” rate – the rate at which the federal funds rate is neither stimulating nor slowing the economy – at somewhere near 2.5% to 2.75%, so about five or six more rates hikes from today’s target range.

Interest rates on credit cards would follow in lockstep. These rate hikes to “neutral” would extract another $8 billion or so a year, on top of the additional $7.5 billion from the prior rate hikes. But that’s not all. Credit card balances continue to rise as our brave consumers are trying to prop up US consumer spending and thus the global economy by borrowing more and more. Thus, rising credit card balances combined with rising interest rates on those balances conspire to produce sharply higher interest costs. Since consumers with high-interest credit-card balances already don’t have enough money to pay off their costly debt, these additional interest payments will further curtail their efforts at making principal payments and thus inflate their credit card balances further.

Ever since it was signed into law in 2010, defenders of Obamacare have dismissed staggering surges in annual premiums by highlighting only the rates paid by those fortunate enough to receive subsidies. In fact, last year we wrote about Marjorie Connolly’s, from Obama’s Department of Health and Human Services, response to the Tennessee insurance commissioner’s fear that the exchanges in his state were “very near collapse” after a staggering 59% premium surge: “Consumers in Tennessee will continue to have affordable coverage options in 2017. Last year, the average monthly premium for people with Marketplace coverage getting tax credits increased just $2, from $102 to $104 per month, despite headlines suggesting double digit increases,” said Marjorie Connolly, HHS spokeswoman, in a statement.

We’re unsure whether Connolly’s comment was just propaganda intended to defend a failing piece of legislation or an intentional, blatant admission that the Department of Health and Human Services just doesn’t care about the majority of Americans, the so-called 1%’ers, who are facing debilitating increases in healthcare costs simply because they manage to live above the poverty line. We’ll let you decide on that one. Be that as it may, as the Miami Herald points out this morning, roughly half of all Obamacare participants, nearly 9 million people in aggregate, don’t qualify for the subsidies that Connolly praised and have been forced to absorb debilitating premium increases for the past several years.

[..] As open enrollment for Affordable Care Act coverage nears the deadline of Dec. 15, and Florida once again leads all states using the federal exchange at healthcare.gov, Heidi and Richard Reiter sit at the kitchen table at their Davie home and struggle to piece together the family’s health insurance for 2018. The Reiters buy their own coverage, but they earn too much to qualify for financial aid to lower their monthly premiums. For 2017, they bought a plan off the exchange and paid $26,000 in premiums for family coverage, including their two sons, ages 21 and 17. Keeping the same coverage for 2018 would have cost the Reiters $40,000 in premiums, a 54% increase. So they selected a lower-priced plan that covers less but costs $29,000 in premiums. “That’s more than a lot of people’s mortgage payments,” Richard Reiter said. “For me, it’s a crisis situation.”

While valuation risk is certainly concerning, it is the extreme deviations of other measures to which attention should be paid. When long-term indicators have previously been this overbought, further gains in the market have been hard to achieve. However, the problem comes, as identified by the vertical lines, is understanding when these indicators reverse course. The subsequent “reversions” have not been forgiving. The chart below brings this idea of reversion into a bit clearer focus. I have overlaid the real, inflation-adjusted, S&P 500 index over the cyclically-adjusted P/E ratio. Historically, we find that when both valuations and prices have extended well beyond their intrinsic long-term trendlines, subsequent reversions beyond those trend lines have ensued. Every. Single. Time.

Importantly, these reversions have wiped out a decade, or more, in investor gains. As noted, if the next correction began in 2018, and ONLY reverts back to the long-term trendline, which historically has never been the case, investors would reset portfolios back to levels not seen since 1997. Two decades of gains lost. With everyone crowded into the “ETF Theater,” the “exit” problem should be of serious concern. “Over the next several weeks, or even months, the markets can certainly extend the current deviations from long-term mean even further. But that is the nature of every bull market peak, and bubble, throughout history as the seeming impervious advance lures the last of the stock market ‘holdouts’ back into the markets.”

Last week, Venezuela announced it would develop a national cryptocurrency backed by its oil reserves, the Petro. Now there is a report that Russia is considering the same thing. Iran will likely follow suit. As of right now this is just a rumor, but it makes some sense. So, let’s treat this rumor as fact for the sake of argument and see where it leads us. The U.S. continues to sanction and threaten all of these countries for daring to challenge the global status quo. There is no denying this. [..] at the heart of this is the petrodollar. Contrary to what many believe, the petrodollar is not the source of the U.S. dollar’s power around the world, but rather the U.S.’s main fulcrum by which to keep competition out of the markets. It is a secondary effect of the dollar’s dominance in global finance today. But it is not the main driver.

Financial market are simply too big relative to the size any one commodity market for it to be the fulcrum on which everything hinges. It was that way in the past. But it is not now. That said, however, getting out from underneath the petrodollar gives a country independence to begin building financial architecture that can be levered up over time to threaten the institutional control it helped create. U.S. foreign policy defends the petrodollar along with other systems in place – the IMF, the World Bank, SWIFT, LIBOR and the central banks themselves – to maintain its control. The main oil producers, however, can escape this control simply by selling their oil in currencies other than the U.S. dollar. That’s not enough to dethrone the dollar, but, like I just said, it is where the process has to start. Therefore, any and all means must be employed to defend the dollar empire by keeping everyone inside that system.

[..] The problem with backing any currency with physical reserves is the fluctuations in value of those reserves. It’s not like oil is a low-beta commodity or anything. But, like everything else in the commodity space, price movements are supposed to be smoothed out by the futures markets helping to coordinate price with time. But the bigger problem is the estimation of those reserves the coin’s value is based on. First, how do you accurately quantify them? Can holders of Petro or Neft-coin trust the Russian or Venezuelan governments to provide accurate assessments of their reserves? Second, there is the ability of the country to pull it out of the ground and sell it into the market at anything close to a fair price. This isn’t a concern for Russia, the world’s 2nd largest supplier of oil and very stable government but Venezuela is the opposite. And, its “Petro” would probably trade at quite a discount early on to the dollar price of oil.

Bitcoin mania is now everywhere. It’s hard to have a conversation with regular people without sooner or later getting into bitcoin. Some of this is just for fun. Manias breed amazement. Miracles are wonderful to behold. But some of it is pretty serious. “We’ve seen mortgages being taken out to buy bitcoin,” said Joseph Borg, president of the North American Securities Administrators Association and director of the Alabama Securities Commission, on CNBC’s Power Lunch today. “People do credit cards, equity lines,” he said. Bitcoin futures trading started Sunday night on the Cboe futures exchange. Next week, the CME will offer trading in bitcoin futures.

This way, speculators can bet with unlimited derivatives on an unregulated digital entity that is backed by nothing and whose cash trading takes place in unregulated opaque and easily hacked exchanges around the world. But Borg doesn’t think that futures contracts legitimize bitcoin. Innovation and technology always outrun regulation, he said. “You’re on this mania curve. At some point in time there’s got to be a leveling off,” he said. “Cryptocurrency is here to stay. Blockchain is here to stay. Whether it is bitcoin or not, I don’t know.” And so the media mania over bitcoin has become deafening.

If you cannot value an asset you cannot be rational. With Bitcoin at $11,000 today, it is crystal clear to me, with the benefit of hindsight, that I should have bought Bitcoin at 28 cents. But you only get hindsight in hindsight. Let’s mentally (only mentally) buy Bitcoin today at $11,000. If it goes up 5% a day like a clock and gets to $110,000 – you don’t need rationality. Just buy and gloat. But what do you do if the price goes down to $8,000? You’ll probably say, “No big deal, I believe in cryptocurrencies.” What if it then goes to $5,500? Half of your hard-earned money is gone. Do you buy more? Trust me, at that point in time the celebratory articles you are reading today will have vanished. The awesome stories of a plumber becoming an overnight millionaire with the help of Bitcoin will not be gracing the social media.

The moral support – which is really peer pressure – that drives you to own Bitcoin will be gone, too. Then you’ll be reading stories about other suckers like you who bought it at what – in hindsight – turned out to be the all-time high and who got sucked into the potential for future riches. And then Bitcoin will tumble to $2,000 and then to $100. Since you have no idea what this crypto thing is worth, there is no center of gravity to guide you or anyone else to make rational decisions. With Coke or another real business that generates actual cash flows, we can at least have an intelligent conversation about what the company is worth. We can’t have one with Bitcoin. The X times Y = Z math will be reapplied by Wall Street as it moves on to something else.

People who are buying Bitcoin today are doing it for one simple reason: FOMO – fear of missing out. Yes, this behavior is so predominant in our society that we even have an acronym for it. Bitcoin is priced today at $11,000 because the fool who bought it for $11,000 is hoping that there is another, greater fool who will pay $12,000 for it tomorrow. This game of greater fools is not new. The Dutch played it with tulips in the 1600s– it did not end well. Americans took the game to a new level with dotcoms in the late 1990s – that round ended in tears, too. And now millennials and millennial-wannabes are playing it with Bitcoin and few hundred other competing cryptocurrencies.

The counterargument to everything I have said so far is that those dollar bills you have in your wallet or that digitally reside in your bank account are as fictional as Bitcoin. True. Currencies, like most things in our lives, are stories that we all have (mostly) unconsciously bought into. Of course, society and, even more importantly, governments have agreed that these fiat currencies are going to be the means of exchange. Also, taxation by the government turns the dollar bill “story” into a very physical reality: If you don’t pay taxes in dollars, you go to jail. (The US government will not accept Bitcoins, gold, chunks of granite, or even British pounds).

The next governor of the Bank of Japan faces a “job from hell.” That’s according to Takeshi Fujimaki, a banker-turned-lawmaker who sees any attempt by Japan’s central bank to exit its program of unprecedented easing as triggering a Greek-like debt crisis. “This is the calm before the battle,” Fujimaki, an opposition Japan Innovation Party politician who once served briefly as an adviser to George Soros, said in an interview at his Tokyo office on Monday. BOJ Governor Haruhiko Kuroda’s five-year term runs out in April, with recent praise from Prime Minister Shinzo Abe strengthening expectations that the 73-year-old will stay on for a second stint. His massive easing program has weakened the yen, bolstered exports and helped stock prices to more than double. But inflation is still short of the government’s 2% target, and critics say the BOJ’s swollen balance sheet is unsustainable.

Fujimaki, 67, said he agreed with the view expressed by Kuroda’s predecessor Masaaki Shirakawa in his 2013 resignation press conference, when he said no judgment could be made on non-traditional monetary easing in Japan and in other developed economies until exits had been completed. Last week, Kuroda said the BOJ can take the appropriate steps to exit when the time comes, but talking specifics of an exit now would end up confusing markets. Even so, Fujimaki said Kuroda should stay on to oversee an exit from the policies he introduced. “Because Mr. Kuroda has taken it this far, he should carry on until the end,” Fujimaki said. “Just taking the good part and running away would be unfair.”

We like to highlight that although Sweden’s property bubble is not the longest running (that accolade goes to Australia at 55 years), it is probably the world’s biggest, even though it gets relatively little coverage in the mainstream financial media. A month ago, we noted that SEB’s housing price indicator suffered its second biggest ever drop, falling by 39 points, only lagging a steeper fall from ten years earlier. This month the indicator, which shows the balance between households forecasting rising or falling prices, fell into negative territory, dropping to -5 from +11 in November. Households expecting prices to rise has almost halved from 66% In October, to 43% in November and 36% this month. The percentage of households expecting prices to fall has risen from 16% in October, to 32% in November and 41% this month.

After the housing price indicator was published, the Swedish krona fell as much as 0.7% versus the Euro to 10.0118, its lowest level since 5 December 2017. Not surprisingly, the focal point of Sweden’s property boom has been Stockholm, where the decline in the housing price indicator in December 2017 was precipitous. According to Bloomberg. “SEB says sharp drop in home-price expectations in Stockholm was main culprit behind the decline in its Swedish home-price indicator, with the indicator falling to -42 in the Swedish capital in Dec. from -6 in Nov. That means the Stockholm indicator is now close to the record low of -47 that was reached in Dec. 2008, at the height of the global financial crisis. (SEB) says 63% of households in Stockholm now expect prices to decline in the coming year while only 21% expect an increase; that’s “a dramatic shift compared with only two months’ ago..”

Given the disproportionate rate of decline in December in Stockholm, SEB was minded to ask whether special factors are at work “rather than general drivers such as fears over rising interest rates or a weak business cycle”. Indeed, aside from south-eastern Sweden, the outlook in all other regions remains positive. With regard to Stockholm, the bank notes that a large increase in new supply of expensive residential property and what it terms “very negative media reporting” have had an impact. Whether that’s a fair assessment, or whether it’s realist reporting of a monumental asset bubble is a moot point. What is indisputable is that the number of Swedish homes for sale has surged in November 2017 compared with the same month last year.

US President Donald Trump directed NASA on Monday to send Americans to the Moon for the first time since 1972, in order to prepare for future trips to Mars. “This time we will not only plant our flag and leave our footprint,” Trump said at a White House ceremony as he signed the new space policy directive. “We will establish a foundation for an eventual mission to Mars and perhaps someday to many worlds beyond.” The directive calls on NASA to ramp up its efforts to send people to deep space, a policy that unites politicians on both sides of the aisle in the United States. However, it steered clear of the most divisive and thorny issues in space exploration: budgets and timelines.

Space policy experts agree that any attempt to send people to Mars, which lies an average of 140 million miles (225 million kilometers) from Earth, would require immense technical prowess and a massive wallet. The last time US astronauts visited the Moon was during the Apollo missions of the 1960s and 1970s. Trump, who signed the directive in the presence of Harrison Schmitt, one of the last Americans to walk on the Moon 45 years ago, said “today, we pledge that he will not be the last.” The better known Buzz Aldrin, the second man on the Moon after Armstrong and a fervent advocate of future space missions, was also present at the ceremony but not mentioned by Trump during his speech.

[..] Trump vowed his new directive “will refocus the space program on human exploration and discovery,” and “marks an important step in returning American astronauts to the Moon for the first time since 1972.” The goal of the new Moon missions would include “long-term exploration and use” of its surface. “We’re dreaming big,” Trump said. His administration has previously held several meetings with SpaceX boss Elon Musk and Amazon owner Jeff Bezos, who also owns Blue Origin.

Exxon Mobil on Monday said it would publish new details about how climate change could affect its business in a move aimed at appeasing critics and forestalling another proxy fight next year. The largest U.S. oil and gas producer said in a filing to U.S. securities regulators that its board agreed to provide shareholders with information on “energy demand sensitivities, implications of two degree Celsius scenarios, and positioning for a lower-carbon future.” Scientists have warned that world temperatures are likely to rise by more than 2 degrees Celsius (35.6°F) this century, surpassing a “tipping point” that a global climate deal aims to avert. Exxon’s statement, which came three days before the deadline for its 2018 annual meeting resolution submissions, said additional information would be released in the near future, but did not provide details.

The company’s board originally opposed providing shareholders with a report outlining the potential impact of global warming on Exxon’s long-term outlook. Thomas P. DiNapoli, New York state’s comptroller, heads one the two lead sponsors of a shareholder resolution calling for Exxon to issue a climate-impact report. He called Monday’s decision “a win for shareholders and for the company’s ability to manage risk.” However, another sponsor noted the lack of specificity in the company’s statement. “This is giving no detail,” said Tim Smith, who leads shareholder engagement efforts at Walden Asset Management, a co-filer of last spring’s resolution. He said Exxon’s statement “needs to be expanded to assure shareowners that they’re responsive to last year’s request.”

Apple is pushing back on shareholder proposals on climate issue and human rights concerns, an effort activists worry could sharply restrict investor rights. In letters to the U.S. Securities and Exchange Commission last month, an attorney for the California computer maker argued at least four shareholder proposals relate to “ordinary business” and therefore can be left off the proxy Apple is expected to publish early next year, ahead of its annual meeting. The attorney, Gene Levoff, cited guidance issued by the SEC on Nov. 1 saying that company boards are generally best positioned to decide if a resolution raises significant policy issues worth putting to a vote.

While companies routinely seek permission to skip shareholder proposals, Apple’s application of the new SEC guidance shows how it could be used to ignore many investor proposals by claiming boards routinely review those areas, said Sanford Lewis, a Massachusetts attorney representing Apple shareholders who had filed two of the resolutions. Were the SEC to side with Apple, “this would be an incredibly dangerous precedent that would essentially say a great many proposals could be omitted,” Lewis said. [..] Often seen as distractions in the past, shareholder measures have taken on new significance as big asset managers increasingly back those on areas like climate change or board diversity.

Apple cited the SEC’s new guidance among other things in seeking to omit the shareholder measures from its proxy, according to letters Apple sent to the SEC. These include calls for Apple to take steps such as establishing a “human rights committee” to address concerns on topics like censorship, and for Apple to report on its ability to cut greenhouse gas emissions.

The EU could scrap a divisive scheme that compels member states to accept quotas of refugees, one of the bloc’s most senior leaders will say this week. The president of the European council, Donald Tusk, will tell EU leaders at a summit on Thursday that mandatory quotas have been divisive and ineffective, in a clear sign that he is ready to abandon the policy that has created bitter splits across the continent. Tusk will set a six-month deadline for EU leaders to reach unanimous agreement on reforms to the European asylum system, but will propose alternatives if there is no consensus. “If there is no solution … including on the issue of mandatory quotas, the president of the European council will present a way forward,” states a draft letter from Tusk to national capitals, seen by the Guardian.

In effect this means scrapping mandatory quotas, because Hungary, Poland and Czech Republic are fiercely opposed to the idea of dispersing refugees around the bloc based on a formula drawn up in Brussels. Tusk is likely to face opposition, however, from other EU bodies, including the European commission. EU leaders introduced compulsory quotas in 2015 at the height of the migration crisis, as thousands of people arrived daily on Europe’s shores, many of whom were refugees from Syria, Iraq and Eritrea. Hungary, Slovakia, Romania and the Czech Republic voted against the move, but the policy was forced through by a majority vote. Hungary and Poland have defied the rest of the EU by not taking a single refugee under the scheme, which aimed to relocate about 120,000 refugees, mainly Syrians. The Czech republic has taken in only 12. All three countries were referred to the European court of justice last week for failing to implement the policy, the usual procedure for flouting EU rules.

Authorities on the Greek island of Lesvos say they have blocked a ship carrying container homes for refugees and other migrants in protest at the refusal of the government and the European Union to move more people to Greece’s mainland. A government-chartered ship carrying the containers remained anchored at Mytilene, the island’s main town, on Monday after municipal vehicles were used to block port facilities. The island’s municipal board was due to meet later on Monday to decide on whether to lift the blockade following talks with the government, state-run TV ERT said. The mayors of five Greek islands facing the coast of Turkey are demanding that the government and EU end a policy of containment for migrants – introduced last year as a deterrent against illegal migration – because living facilities are severely overcrowded.

The German Foreign Ministry has made it clear that it will not provide additional winter assistance to refugees on the Aegean islands. In a related question from German newspapers, the foreign ministry replied that “responsibility for accommodating and feeding refugees falls under the jurisdiction of each country.” According to dpa, the Foreign Ministry recalled that Berlin recently funded the installation of 135 heated containers for a total of 800 people in two camps in the Thessaloniki region and that the EU has allocated up to now 1.4 billion euros to tackle the refugee crisis in Greece.

Meanwhile, there is media report that Greece has persuaded Turkey to accept migrant returns from the mainland in order to reduce critical overcrowding in its refugee camps. The Kathimerini daily said the agreement came during a strained two-day state visit by Turkish President Recep Tayyip Erdogan this week, during which he angered his hosts with talk of revising borders and complaints about Greece’s treatment of its Muslim minority. The deal is in addition to Turkey’s existing agreement to take back migrants from Aegean island camps, under the terms of an EU-Turkey pact.

In our China Beige Book, we quiz over 3,300 firms across China about the performance of their companies as well as the broader economy. Their responses reveal that much of the exuberance about China today is based on dangerous misconceptions. The first and most obvious myth is that China is actually deleveraging, as officials claim. Responses from Chinese bankers support the notion that regulators, at least for the moment, have successfully targeted certain forms of shadow financing such as wealth management products. Companies, however, don’t seem to be feeling much pressure to curb their excesses. In the second quarter, while firms reported facing moderately higher interest rates and borrowing modestly less, that only slowed the pace of leveraging instead of reversing it. And even that progress has since stalled.

Third-quarter loan applications rose, rejections fell and companies borrowed more. Interest rates at both banks and shadow financials slid. What officials are calling deleveraging – rolling back excess credit – still represents more, uneven leveraging. If the restrictions on financials do extend to companies in 2018 and deleveraging actually begins, the process could be much more traumatic for the Chinese economy than most people currently recognize. The second myth is that the Chinese economy has finally begun to rebalance away from manufacturing and investment to services and consumption. In reality, China’s stronger 2017 performance has depended almost entirely on a revival of the old economy; the improvement in both growth and jobs drew heavily upon commodities, property and, most consistently, manufacturing. Call it “de-balancing.”

[..] China hasn’t slashed overcapacity in commodities sectors. Xi has incessantly touted what he calls “supply-side reforms,” which would seem to give Chinese companies very strong incentive to report results showing such cuts. Yet for more than a year, firms have indicated the opposite. While some gross capacity has been taken offline to much fanfare, net capacity has continued to rise. From July through September, hundreds of coal, steel, aluminum and copper companies reported a sixth straight quarter of overall capacity rising, not falling.

Two U.S. senators on Tuesday reached a bipartisan agreement to shore up Obamacare for two years by reviving federal subsidies for health insurers that President Donald Trump planned to scrap, and the president indicated his support for the plan. The deal worked out by Republican Senator Lamar Alexander and Democratic Senator Patty Murray would meet some Democratic objectives, including reviving the subsidies for Obamacare and restoring $106 million in funding for a federal program that helps people enroll in insurance plans. In exchange, Republicans would get more flexibility for states to offer a wider variety of health insurance plans while maintaining the requirement that sick and healthy people be charged the same rates for coverage.

The Trump administration said last week it would stop paying billions of dollars to insurers to help lower-income Americans pay medical expenses, part of the Republican president’s effort to dismantle Obamacare, former Democratic President Barack Obama’s signature healthcare law. The subsidies to private insurers cost the government an estimated $7 billion this year and were forecast at $10 billion for 2018. Trump’s move to scuttle them had raised concerns about chaos in insurance markets. Trump hoped to make good on his campaign promise to dismantle the law when he took office in January, with Republicans, who pledged for seven years to scrap it, controlling Congress. But he has been frustrated with their failure to pass legislation to repeal and replace it.

Obamacare, formally known as the Affordable Care Act, extended health insurance coverage to 20 million Americans. Republicans say it is ineffective and a massive government intrusion in a key sector of the economy. The Alexander-Murray plan could keep Obamacare in place at least until the 2020 presidential campaign starts heating up. “This takes care of the next two years. After that, we can have a full-fledged debate on where we go long-term on healthcare,” Alexander said of the deal.

[..] Senator Bernie Sanders threw his weight behind the effort. In an interview with Reuters, Sanders said Alexander was a “well-respected figure” known for bipartisanship and that the Tennessee senator’s reputation would help propel the legislation through the Senate. Trump, during comments at the White House, suggested he could get behind the Alexander-Murray plan as a short-term solution. In remarks later at the Heritage Foundation, a conservative think tank, Trump commended the work by Alexander and Murray, but said: “I continue to believe Congress must find a solution to the Obamacare mess instead of providing bailouts to insurance companies.”

A presentation by Blanchard and Summers provides a useful summary of how elite thinking has changed. They basically draw three lessons from the crisis: 1) the financial industry matters, 2) government should use a wider array of policies to fight recessions, and 3) recessions can last longer than expected. [..] The real sea change is the third one – the reconsideration of what recessions really are. Most modern econ theories posit that recessions arrive randomly, instead of as the result of pressures that build up over time. And they assume that recessions are short-lived affairs that go away of their own accord. If these assumptions are wrong, then most of the theories written down in macroeconomics journals over the past several decades – and most of those being written as we speak – are of questionable usefulness.

Blanchard and Summers are hardly the first to raise this possibility – economists have known for decades that recessions might not be random, short-lived events, but the idea always remained on the fringes. One big reason was simple mathematical convenience – models where recessions are like rainstorms, arriving and departing on their own, are mathematically a lot easier to work with. A second was data availability – unlike in geology, where we can draw on Earth’s whole history, reliable macroeconomic data goes back less than a century. If economic fluctuations really do have long-lasting effects, it will be very hard to identify those patterns from just a few decades’ worth of history.

If macroeconomists heed Blanchard and Summers’ advice, they will have to do harder math, and they will find better data to test their models. But their challenges won’t end there. If the economy can linger in a good or bad state for a long time, it’s almost certainly a chaotic system. Researchers have known for decades that unstable economies are very hard to work with or predict. In the past, economists have simply ignored this unsettling possibility and chosen to focus on models with only one possible long-term outcome. But if Blanchard and Summers are any indication, the Great Recession might mean that’s no longer an option.

This morning, BoE Governor Mark Carney discussed the risks of a hard Brexit during his testimony to the UK Parliamentary Treasury Committee. There was renewed weakness in Sterling during his testimony. Ironically, given the fall in Sterling, Carney explained why Europe’s financial sector is more at risk than the UK from a “hard” or “no-deal” Brexit. We wonder whether Juncker and Barnier appreciate the threat that a “no-deal” Brexit poses for the EU’s already fragile financial system? When asked does the European Council “get it” in terms of potential shocks to financial stability, Carney diplomatically commented that “a learning process is underway.” Having sounded alarm bells about clearing in his last Mansion House speech, he noted “These costs of fragmenting clearing, particularly clearing of interest rate swaps, would be born principally by the European real economy and they are considerable.”

Calling into question the continuity of tens of thousands of derivative contracts, he stated that it was “pretty clear they will no longer be valid”, that this “could only be solved by both sides” and has been “underappreciated” by Europe. Moving on to the possibility that there might not be a transition period, Carney had a snipe at Europe for its lack of preparation “We are prepared as we should be for the possibility of a hard exit without any transition…there has been much less of that done in the European Union.” Maybe it’s Europe, not the UK, that needs the transition period most.

In Carneys view “It’s in the interest of the EU 27 to have a transition agreement. Also, in my judgement given the scale of the issues as they affect the EU 27, that there will ultimately be a transition agreement. There is a very limited amount of time between now and the end of March 2019 to transition large, complex institutions and activities…If one thinks about the implementation of Basel III, we are alone in the current members of the EU in having extensive experience of managing the transition for individual firms of various derivative and risk activities from one jurisdiction back into the UK. That tends to take 2-4 years. Depending on the agreement, we are talking about a substantial amount of activity.”

The British government once hoped that the Oct. 19-20 meeting would be the moment when the Brexit negotiations could move on to discuss trade. That aspiration now seems hopeless. European leaders look set to insist on further delay until there is more progress in the first stage of talks, above all in reaching agreement on how much Britain will have to pay to settle its obligations when it leaves.

[..] If economic size and time favor the EU, the British government’s strongest card is money – one that it has played in various guises for centuries with its continental neighbors – and it is naturally reluctant to show its full hand too early. Even so May has already made an important concession. As part of the transition period of around two years that she called for in her emollient Florence speech last month, Britain would continue to pay in to the EU budget to ensure that none of the member states was out of pocket owing to the decision to leave. These net payments of around €10 billion ($11.8 billion) a year would fix the immediate problem facing the EU, the hole that would otherwise open up in its finances during the final two years of its current budgetary framework, which runs from 2014 to 2020.

But that extra money from aligning Britain’s effective date of departure with the end of the EU’s budgeting plan will not be enough, for two reasons. One is the way the EU in effect borrows from the future, by making spending commitments that it pays for later. In principle, the EU cannot borrow to pay for expenditure. But, through its accounting procedures, the EU can and does commit it to spending that will be paid for by future receipts from the member states. What this means is that even after 2020 there will still be payments due on commitments made under the current seven-year spending plan. That pile of unpaid bills, eloquently called the “reste à liquider” (the amount yet to be settled), is forecast to be €254 billion at the end of 2020.

Estimates of what Britain might owe towards this vary, but taking into account what might have been spent on British projects it could be around €20 billion. On top of that – and the second main reason why the EU is holding out for more – the EU has liabilities, notably arising from the unfunded retirement benefits of European staff estimated at €67 billion at the end of 2016, which it is expecting Britain to share. Even taking into account some potential offsets from its share of assets, Britain may face a bill of between €30 billion and €40 billion on top of the €20 billion paid during the transition period.

Bridgewater Associates is adding to its billion-dollar short against the Italian economy. The world’s largest hedge fund disclosed a $300 million bet against Eni SpA, Italy’s oil and gas giant, data compiled by Bloomberg show. Bloomberg previously reported that Ray Dalio’s firm had wagered more than $1.1 billion against shares of six Italian financial institutions and two other companies. This latest bet is the hedge fund’s second-largest against an Italian company, trailing only the $310 million against Enel SpA, the country’s largest utility. Eni’s majority holder is the Italian government via state lender Cassa Depositi e Prestiti SpA and the Ministry of Economy. The public involvement also is reflected in the government’s role in appointing the chief executive officer. Current CEO Claudio Descalzi has been at the helm since 2014 and was reconfirmed this year.

Boeing’s diminutive Canadian rival just found itself one heck of a wingman. The world’s largest aerospace company tried to block Bombardier’s all-new C Series jet from the U.S. by complaining to the government about unfair competition. Now that move is backfiring as Boeing’s primary foe, Airbus, takes control of the Canadian aircraft – with plans to manufacture in Alabama. The deal leaves Boeing’s 737, the company’s largest source of profit, to face a strengthened opponent in the market for single-aisle jetliners, where Airbus’s A320 family already enjoys a sales lead. The European planemaker is riding to the rescue of a plane at the center of a trade dispute that soured U.S. relations with Canada and the U.K., where the aircraft’s wings are made.

“For Boeing, its decision to wage commercial war on Bombardier has arguably had some unintended negative outcomes,” Robert Stallard, an analyst at Vertical Research Partners, said in a report. “As well as damaging relations with the Canadian and U.K. governments and some major airline customers, it has now driven Bombardier into the arms of its arch competitor.” Boeing on Tuesday held firm to its stance against the C Series, saying the deal with Airbus would have “no impact or effect on the pending proceedings at all” in the trade dispute. Boeing won a preliminary victory against Bombardier last month when President Donald Trump’s administration imposed import duties of 300% on the C Series.

Huws says the golden age for the gig economy was some time around 2013, when companies took a smaller cut and there were fewer drivers/riders/factotums to compete with. “As Deliveroo pass on all risk to the rider, there’s nothing to stop them over-recruiting in an area and flooding the city with riders, which is exactly what we saw last winter,” says Guy McClenahan, another Brighton rider (Deliveroo maintain that the hundreds of riders in the area earn on average well above the national living wage). Over time, Uber has increased the commission it takes from drivers while reducing fares. Drivers are finding themselves working much longer hours in order to make the same pay – or far less. (There are currently no time limits on how many hours Uber drivers can work a week in the UK, but the company is testing changes and says it plans to introduce limits over a 24-hour period.)

TaskRabbit, the online platform for handymen and odd jobs, which was recently bought by Ikea, took away a rate in which contractors would earn more money for repeat commissions – and buried that news in an email about introducing the option for clients to tip. [..] Huws points out that the gig economy has always existed: cash-in-hand or on-call work or people turning up at building sites or dockyards in the hope of a day’s work. But since the 2008 crash, jobs that provide a secure income have become harder to come by. It is true that the unemployment rate among 16- to 24-year-olds in the UK is 12%, while in parts of Europe it is 40%. But that doesn’t mean much if many of those people are in precarious “self-employment” – the McKinsey Global Institute estimates this may be up to 30% of working-age adults across Europe. Huws says the notion of a career is being eroded, with young people often working a patchwork of different occupations.

[..] Huws worries about something else, too: the wellbeing of gig-economy millennial workers. This kind of employment can be “really damaging for self-esteem”, she says. As Hughes and Diggle both say, crowd work can be lonely. “Especially if you’re working a double shift,” says Diggle. “Or sometimes you don’t feel human. You’re just handing a bag over and some people take the bag, don’t look at you and close the door. And then don’t tip. One day I’ll be on stage singing, and the next I’m delivering food on my bicycle and it does feel … deflating.”

Greece was in recession last year, as revised data from the Hellenic Statistical Authority (ELSTAT) showed on Tuesday that the economy shrank 0.2% compared to 2015 against a previous estimate for zero growth. Furthermore, the Foundation for Economic and Industrial Research (IOBE) forecast that 2017 will close with growth of just 1.3%, against a government estimate of 1.8%. That the way out of the crisis is proving more arduous and uncertain than many had predicted was underscored by the two sets of data released on Tuesday, with IOBE Director General Nikos Vettas warning that the recovery may turn out to be “short-term and fragile” unless the pending crucial structural reforms are implemented.

ELSTAT’s downward revision for 2016 is mainly based on consumer spending, which declined 0.3% compared to 2015, against a previous estimate in March 2017 for an increase of 0.6%. Even in March, when ELSTAT announced zero growth for 2016, the figures created a headache for Prime Minister Alexis Tsipras, who had previously said the economy had grown in 2016. Yesterday’s revision turned stagnation into recession for another year. It is also impressive that while the economy shrank 0.2%, taxation on products increased 7.8%, against a hike of 1.7% in 2015 and 0.8% in 2014. The revision also revealed that 2014 saw growth of 0.7%, against an estimate of 0.3% in March. That upward course was clearly interrupted by the January 2015 election.

IOBE undercut the government’s growth estimates for this year and next, with its president, Takis Athanasopoulos, saying, “Indeed, our economy is showing signs of improvement, but its rate remains below what is necessary for the country to leave the crisis behind it for good.” Next year IOBE anticipates growth of 2%, against an official forecast of 2.4%, putting the achievement of fiscal targets into question. The weak 1.3% recovery rate seen for this year, compared to the original 2.7% estimate of the budget and the bailout program, is according to IOBE due to the weak momentum of investments.

The United States has approved the possible sale of more than 120 upgrade kits from Lockheed Martin to the Greeks for their F-16 fighter jet fleet. The deal, worth $2.4bn, was announced as U.S. President Donald Trump met with Greek Prime Minister Alexis Tsipras in Washington, D.C. Trump, who has repeatedly criticized NATO countries for not meeting the alliance’s defense budget targets, applauded Greece for meeting the goal of each member spending two percent of their gross domestic product on their military and highlighted the F-16 upgrade plans. “They’re upgrading their fleets of airplanes – the F-16 plane, which is a terrific plane,” Trump said ahead of a bilateral meeting. “They’re doing big upgrades.”

“This agreement to strengthen the Hellenic Air Force is worth up to 2.4 billion U.S. dollars and would generate thousands of American jobs,” Trump said during his joint press conference with Tsipras. Greek Defense Minister Panos Kammenos sought later to downplay the cost of the deal for Greece. In a message on twitter he said that the cost to Greece will be 1.1 billion euros. “The ceiling in the budget for the upgrading of the F-16 is 1.1 billion euros”, he said. “The rest will come from aid programs and offsets”, he added. According to the U.S. Defense Security Cooperation Agency (DSCA) there are currently no known offsets. However, Greece typically requests offsets. Any offset agreement will be defined in negotiations between Greece and the contractor, Lockheed Martin. .

Alberta’s oil and gas industry – Canada’s largest producer of fossil fuel resources – could be emitting 25 to 50% more methane than previously believed, new research has suggested. The pioneering peer reviewed study, published in Environmental Science & Technology on Tuesday, used airplane surveys to measure methane emissions from oil and gas infrastructure in two regions in Alberta. The results were then compared with industry-reported emissions and estimates of unreported sources of the powerful greenhouse gas, which warm the planet more than 20 times as much as similar volumes of carbon dioxide.

“Our first reaction was ‘Oh my goodness, this is a really big deal,” said Matthew Johnson, a professor at Carleton University in Ottawa and one of the study’s authors. “If we thought it was bad, it’s worse.” Carried out last autumn, the survey measured the airborne emissions of thousands of oil and gas wells in the regions. Researchers also tracked the amount of ethane to ensure that methane emissions from cattle would not end up in their results. In one region dominated by heavy oil wells, researchers found that the type of heavy oil recovery used released 3.6 times more methane than previously believed. The technique is used in several other sites across the province, suggesting emissions from these areas are also underestimated.

By the time he died, in 1950, Bernard Shaw, as the most widely read socialist writer in the English-speaking world, had done as much as anyone to banish the fallacy that poverty is essentially a moral failing – and conversely that great riches are proof of moral worth. His most passionate concern was with poverty and its causes. He was haunted by the notorious Dublin slums of his childhood. As his spokesman Undershaft puts it in Major Barbara: “Poverty strikes dead the very souls of all who come within sight, sound or smell of it.” The question – why are the poor poor? – has a number of possible answers in the 21st century, just as it had in the late 19th. A Eurobarometer report in 2010 examined attitudes to poverty in the European Union. The most popular explanation among Europeans (47%) for why people live in poverty was injustice in society.

[..] In the preface to Major Barbara, Shaw attacks “the stupid levity with which we tolerate poverty as if it were … a wholesome tonic for lazy people”. His great political impulse was to de-moralise poverty, and his most radical argument about poverty was that it simply doesn’t matter whether those who are poor “deserve” their condition or not – the dire social consequences are the same either way. He assails the absurdity of the notion implicit in so much rightwing thought, that poverty is somehow more tolerable if it is a punishment for moral failings: “If a man is indolent, let him be poor. If he is drunken, let him be poor. If he is not a gentleman, let him be poor. If he is addicted to the fine arts or to pure science instead of to trade and finance, let him be poor … Let nothing be done for ‘the undeserving’: let him be poor. Serve him right! Also – somewhat inconsistently – blessed are the poor!”

In an era when many on the left purported to despise money and romanticised poverty, Shaw argued that poverty is a crime and that money is a wonderful thing. He recognised that there is no relationship between poverty and a supposed lack of a work ethic: Eliza Doolittle is out selling her flowers late at night in the pouring rain but she is still dirt poor. (Conversely, when she is “idle” and being kept by Higgins, she leads a life of relative luxury.) And therefore the cure for poverty can never be found in moral judgments. The cure for poverty is an adequate income. “The crying need of the nation,” he wrote, “is not for better morals, cheaper bread, temperance, liberty, culture, redemption of fallen sisters and erring brothers, nor the grace, love and fellowship of the Trinity, but simply for enough money.

And the evil to be attacked is not sin, suffering, greed, priestcraft, kingcraft, demagogy, monopoly, ignorance, drink, war, pestilence, nor any other of the scapegoats which reformers sacrifice, but simply poverty.” The solution he proposed was what he called a “universal pension for life”, or what we now call a universal basic income.

1) Boy, was I right to say US politics should be observed through the eyes of Shakespeare.

2) Playing with people’s health care, let alone for petty political reasons, is not forgiveable.

3) What a bunch of has-beens these people are. Limit their terms, close the revolving doors, and let the future be decided by people young enough to actually have a future. Oh, and get money out of politics.

The Senate blocked the latest Republican attempt to repeal Obamacare in a dramatic floor vote early Friday morning, yet again stalling — for now — the key campaign goal that eludes the GOP six months into the Trump administration. Three GOP defections — Sens. Susan Collins of Maine, Lisa Murkowski of Alaska and John McCain of Arizona — sank the measure in a 49-51 vote. McCain, who recently returned to the Senate after getting diagnosed with brain cancer, cast his “no” vote to audible gasps on the chamber’s floor, according to reporters there. Senate Republicans released the plan late Thursday just hours before voting on an amendment to take up the bill. The GOP could only afford to lose two votes on the proposal, which many senators suggested they would not even want to see become law.

The measure came after separate pushes to immediately replace the Affordable Care Act or repeal it with a two-year transition period failed amid GOP divisions. Several Republican senators slammed the plan and appeared to not even want it to become law. It marks another blow to the sprawling agenda that Republicans hoped to accomplish when President Donald Trump won the White House and the GOP held both chambers of Congress in November. After the vote, a visibly frustrated Senate Majority Leader Mitch McConnell called it “clearly a disappointing moment.” “So yes, this is a disappointment, a disappointment indeed … I regret that our efforts were simply not enough this time,” McConnell said.

Vladimir Putin has accused US lawmakers of “insolence”, and promised Russia will retaliate if the latest round of US sanctions against Russia are signed into law. The House of Representatives voted by 419 votes to three on Tuesday to pass the new sanctions bill, which targets Russia as well as North Korea and Iran. The US legislation was passed overwhelmingly by the Senate on Thursday, and will now go to Donald Trump for his signature. Trump, who enjoyed two warm conversations with Putin at the G20 summit earlier this month, is likely to face a major backlash if he attempts to veto the legislation, with his administration already embroiled in a Russia scandal. “We are behaving in a very restrained and patient way, but at some moment we will need to respond,” said Putin at a press conference with his Finnish counterpart, Sauli Niinistö.

“It’s impossible to endlessly tolerate this kind of insolence towards our country,” Putin said, referring to the sanctions. “This practice is unacceptable – it destroys international relations and international law.” Putin was vague on exactly how Russia might respond. The newspaper Kommersant quoted two unnamed sources saying a range of potential responses was under consideration in Moscow, including expelling US diplomats, seizing diplomatic properties, increasing restrictions on US companies working in Russia and halting enriched uranium shipments to US power plants. [..] Putin and other Russian officials have repeatedly denied any meddling in the US election, while US intelligence agencies say they have overwhelming evidence of a coordinated Russian campaign. Putin on Thursday described the allegations as “hysteria”, and said: “It’s a great pity that Russian-US relations are being sacrificed to resolve questions of domestic politics.”

The striking Case-Shiller regional charts shown below, courtesy of MHanson.com, make Mark Hanson angry: “so, 2006/2007 was the largest house price bubble ever, but there is nothing to see here in 2017?” and sarcastically points out that “if this isn’t a house price bubble, I would hate to see one.” His bottom line: “If 2006/07 was the peak of the largest housing bubble in history with affordability never better vis a’ vis exotic loans; easy availability of credit; unemployment in the 4%’s; the total workforce at record highs; and growing wages, then what do you call “now” with house prices at or above 2006 levels; worse affordability; tighter credit; higher unemployment; a weakening total workforce; and shrinking wages? Whatever you call it, it’s a greater thing than the Bubble 1.0 peak.”

[..] Income required to buy the avg priced builder house is at historical highs and has completely diverged from the multi-decade trend line. Historically low growth & rebound relative to resales suggest “lack of supply” meme in the Existing Sales market is over-stated.

“Peak builder is here.”
1) New Home Sales “up to” 1995 levels after $15 TRILLION in debt and Fed liquidity aimed largely at the sector.
2) Builder pricing power largely flat for 2-years.
3) Income required to buy the average priced builder house has completely diverged from the multi-decade trend line. This obviously explains why sales are only at 600k SAAR now vs 1.2 million in Bubble 1.0. Reversion to this mean will occur…either thru a sharp rise in income; new exotic loan programs, which make payment less; or house prices dropping.

4) Last time builders were this euphoric was the peak of the biggest credit bubble in history.

Every major market peak, and subsequent devastating mean reverting correction, has ever been the result of the exact ingredients seen previously. Only the ignorance of its existence has been a common theme. The reason that investors ALWAYS fail to recognize the major turning points in the markets is because they allow emotional “greed” to keep them looking backward rather than forward. Of course, the media foster’s much of this “willful” blindness by dismissing, and chastising, opposing views generally until it is too late for their acknowledgement to be of any real use. The next chart shows every major bubble and bust in the U.S. financial markets since 1871 (Source: Robert Shiller)

At the peak of each one of these markets, there was no one claiming that a crash was imminent. It was always the contrary with market pundits waging war against those nagging naysayers of the bullish mantra that “stocks have reached a permanently high plateau” or “this is a new secular bull market.” Yet, in the end, it was something that was unexpected, unknown or simply dismissed that yanked the proverbial rug from beneath investors. What will spark the next mean reverting event? No one knows for sure, but the catalysts are present from: • Excess leverage (Margin debt at new record levels) •IPO’s of negligible companies (Blue Apron, Snap Chat) • Companies using cheap debt to complete stock buybacks and pay dividends, and; • High levels of investor complacency.

Either individually, or in combination, these issues are all inert. Much like pouring gasoline on a pile of wood, the fire will not start without a proper catalyst. What we do know is that an event WILL occur, it is only a function of “when.” The discussion of why “this time is not like the last time” is largely irrelevant. Whatever gains that investors garner in the between now and the next correction by chasing the “bullish thesis” will be wiped away in a swift and brutal downdraft.

Embattled Japanese Defence Minister Tomomi Inada on Friday said she was resigning, after a series of gaffes, missteps and a cover-up at her ministry that have contributed to a sharp plunge in public support for Prime Minister Shinzo Abe. Inada, 58, an Abe protege who shares his conservative views and had been suggested as a possible future premier, had already expected to be replaced in a likely cabinet reshuffle next week that Abe hopes will help rebuild his ratings. Support for the prime minister has sunk below 30% in some polls, due to scandals over suspected cronyism and a view among many voters that he and his aides took them for granted.

Abe apologized “to the people from my heart”, in comments to reporters carried live on national television after Inada announced her resignation. He said Foreign Minister Fumio Kishida would add the defense portfolio to his duties, to eliminate any gap at a time when Japan faces tough security challenges, such as from a volatile North Korea. “I want to make every effort to maintain a high degree of vigilance and protect the security of the people,” Abe said. Abe had drawn fire from both ruling and opposition party lawmakers for retaining Inada despite her perceived incompetence. “He should have thrown Inada under the bus long ago … doing so on the eve of a cabinet reshuffle only looks like desperation,” said Jeffrey Kingston, director of Asian Studies at Temple University Japan.

A global borrowing benchmark that became synonymous with rigged financial markets, and cost banks some $9 billion in fines, is going away. Andrew Bailey, the head of Britain’s Financial Conduct Authority, said in a speech today that the regulator will phase out the indicator, Libor, by the end of 2021. Bailey said the reason the London interbank offered rate is being scrapped is because the market underpinning the benchmark—unsecured bank lending—has dried up. For one particular Libor benchmark—there are many rates for various durations and currencies—there were only 15 transactions last year, he said. Such benchmarks have long been problematic and susceptible to manipulation. Libor, for example, is based on an estimate of what supposed experts at banks think a borrowing rate would be.

Bloomberg describes the process like this: “The benchmark is the average rate a group of 20 banks estimate they’d be able to borrow funds from each other in five different currencies across seven time periods, submitted by a panel of lenders every morning. Its administration was overhauled in the wake of the scandal, with Intercontinental Exchange Inc. taking over from the then-named British Bankers’ Association.” Before the financial crisis, banks submitted daily estimates of borrowing rates to the BBA, which then averaged them to calculate that day’s Libor rate. Via allegedly colluding, the banks submitting rates could nudge the average up or down, depending on what was needed to increase a profit or reduce a loss in their portfolios.

Libor is of global importance because it’s used to help determine borrowing costs for more than $300 trillion in securities, for things like student loans and mortgages. But as a trader once said in a transcript uncovered by regulators, it’s “just amazing how libor fixing can make you that much money.” The Libor scandal was also part of an era in which recorded electronic communications—chat messages—became evidence and got a lot of people in a lot of trouble. Similar market manipulation was discovered in things like foreign-currency exchange rates and commodity prices. And now Libor is being scrapped. Banks didn’t really want to participate in the rate-setting process anymore anyway, Bailey said, given the market had shrank by so much. (Their recent history of being fined billions for their role in daily rate submissions probably didn’t help.) Some new indicator will have to be agreed on.

Royal Dutch Shell has reported a large rise in second quarter profits after the energy giant was boosted by higher oil and gas prices. The firm said adjusted earnings rose from £800m to £2.7bn, an increase of 245 per cent, as chief executive Ben van Beurden said he is making progress on “reshaping the company”. He said: “Cash generation has been resilient over four consecutive quarters, at an average oil price of just under $50 per barrel. “The external price environment and energy sector developments mean we will remain very disciplined, with an absolute focus on the four levers within our control, namely capital efficiency, costs, new project delivery, and divestments.

“I am confident that we are on track to deliver a world-class investment to our shareholders.” The figures were flattered by a disastrous second quarter in 2016, when it was stung by dilapidated crude prices and costs linked to its takeover of BG Group. This time last year Brent Crude was trading at round 45 US dollars a barrel compared to circa 50 US dollars today. Shell is also embarking on an ambitious cost-cutting drive and a £24.6bn divestment initiative. To this end, the oil major has sold off more than £16bn of assets since the BG takeover. Shell this year announced it will sell off a package of North Sea assets for up to £3bn to smaller rival Chrysaor, and recently agreed to sell its stake in Irish gas project Corrib in a deal worth up to £956 million.

Caution lights are flashing for the oil industry. Facing lower-than-expected commodity prices, drillers from ConocoPhillips to Hess to Statoil have slashed their capital spending plans in recent days, as companies lay out their plans to cope with oil prices stuck below $50 a barrel. The budget cuts won’t necessarily mean less oil or natural gas on the market, with some of the companies saying they can now do more with less and expect to produce just as much oil and gas in 2017. But they speak to an investor community that’s grown anxious as a global rally in crude prices has stalled out this year.

“The expectation was that oil would be at least above $50 by this time,” said Brian Youngberg, an energy analyst with Edward Jones & Co. in St. Louis. “Right now, the market wants you to spend within your cash flow, no exceptions allowed. It’s just a response to that.” The “modest tweaks” in this week’s second-quarter earnings reports will probably continue in the coming days, Youngberg said, as drillers focused on U.S. shale plays take center stage. “Companies are going to be cautious,” he said. “No one wants to be the outlier.”

A US jury indicted a Russian man on Wednesday as the operator of a digital currency exchange he allegedly used to launder more than $4 billion for people involved in crimes ranging from computer hacking to drug trafficking. Alexander Vinnik was arrested in a small beachside village in northern Greece on Tuesday, according to local authorities, following an investigation led by the US Justice Department along with several other federal agencies and task forces. US officials described Vinnik in a Justice Department statement as the operator of BTC-e, an exchange used to trade the digital currency bitcoin since 2011.

They alleged Vinnik and his firm “received” more than $4 billion in bitcoin and did substantial business in the United States without following appropriate protocols to protect against money laundering and other crimes. US authorities also linked him to the failure of Mt. Gox, a Japan-based bitcoin exchange that collapsed in 2014 after being hacked. Vinnik “obtained” funds from the hack of Mt. Gox and laundered them through BTC-e and Tradehill, another San Francisco-based exchange he owned, they said in the statement.

I don’t like armies. They are dangerous institutions. Soldiers are not heroes just because they fight. And I’ve grown tired of saying that those who live by the sword sometimes die by the sword. But in an age when the Americans and the Iraqis and Isis can account for 40,000 civilian deaths in Mosul in the past twelve months, compared to 50,000 civilians slaughtered by the Mongols in 13th-century Aleppo – a human rights improvement of US aircrews, Iraqi brutality and Isis sadism over the Mongol hordes by a mere 10,000 souls – death sometimes seems to have lost its meaning. Unless you know the victims or their families. I have a friend whose mother was murdered in the Damascus suburb of Harasta near the start of the Syrian war, another whose brother-in-law was kidnapped east of the city and never seen again.

I met a little girl whose mother and small brother were shot down by al-Nusrah killers in the town of Jisr al-Shughour, and a Lebanese who believes his nephew was hanged in a Syrian jail. And then, this month, in the eastern Syrian desert, near the dust-swept shack village of al-Arak, a Syrian soldier I’d come to know was killed by Isis. He was, of course, a soldier in the army of the Syrian regime. He was a general in an army constantly accused of war crimes by the same nation – the United States – whose air strikes contributed so generously to the obscene massacre in Mosul. But General Fouad Khadour was a professional soldier and he was defending the oil fields of eastern Syria – the crown jewels of Syria’s economy, which was why Isis tried to occupy them all and why they killed Khadour – and the war in the desert is not a dirty war like so many of the conflicts perpetrated in Syria.

When I met him west of Palmyra, Isis had just conquered the ancient Roman city and publicly chopped or blown off the heads of the civilians and soldiers and civil servants who did not manage to flee. Just a year before, the general’s son, also a soldier, had been shot dead in battle in Homs. Fouad Khadour merely nodded when I mentioned this. He wanted to talk about the war in the hot, brown mountains south of Palmyra, where he was teaching his soldiers to fight back against the Isis suicide attackers, to defend their isolated positions around the oil pumping and electricity transmission station where he was based, and to save the T4 pipelines on the road to Homs. The Americans, who proclaimed Isis to be an “apocalyptic” force, sneered that the Syrian army did not fight Isis. But Khadour and his men were standing up to Isis before the Americans ever fired a missile, and learning the only lesson that soldiers can understand when confronted by a horrific enemy: not to be afraid.

France says it plans to set up “hotspots” in Libya to process asylum seekers, in a bid to stem the flow of migrants to Europe. President Emmanuel Macron said the move would stop people not eligible for asylum from “taking crazy risks”. The centres would be ready “this summer”. He said that between 800,000 and a million people were currently in camps in Libya hoping to get into Europe. But many of them did not have a right to asylum, Mr Macron said. The French leader said that migrants were destabilising Libya and Europe by fuelling people-smuggling, which in turn funded terrorism. “The idea is to create hotspots to avoid people taking crazy risks when they are not all eligible for asylum. We’ll go to them,” he said on Thursday at a naturalisation ceremony in the central city of Orléans.

On Tuesday, Mr Macron mediated talks in Paris between Libya’s opposing governments. UN-backed Prime Minister Fayez al-Sarraj and Khalifa Haftar, the rival military commander who controls the east, committed to a conditional ceasefire after the meeting. They are aiming to end the conflict which has engulfed the country since Col Muammar Gaddafi was ousted in 2011. Mr Macron and other EU leaders had been hoping for some sort of agreement, as Libya has become a key route for migrants making their way to Europe. The French leader said he hoped the deal would be a blow to the human traffickers who work in the region.

Macron’s Libya diplomacy is just one irritant in increasingly tension-filled Franco-Italian relations. In May, after meeting Gentiloni in Paris, Macron announced: “We have not listened enough to Italy’s cry for help on the migration crisis.” But Macron’s position since hasn’t changed much from Francois Hollande, his predecessor in the Elysee Palace, to the Italian government’s rising anger. “Italian pleas for more burden-sharing by other EU countries have, so far, fallen on deaf ears. Italy’s refugee centers and shelters have reached their capacity of 200,000. So far this year nearly 100,000 asylum seekers have crossed the Mediterranean from Libya — a 17% increase over the same period last year — and with months more of good weather, another 100,000 asylum seekers are likely to land at Italian ports.

This month, Italy’s deputy foreign minister, Mario Giro, complained, “it doesn’t seem like France wants to help us concretely.” French police are blocking hundreds of migrants on the Italian side of the border at Ventimiglia from entering France; the French government is refusing to allow asylum seekers rescued in the Mediterranean from landing at French ports and, like nearly every other EU country, France hasn’t come anywhere near meeting its quota of migrants as agreed to under a 2015 EU refugee relocation scheme. Macron this month talked of distinguishing between war refugees and economic migrants, indicating that France won’t admit any asylum-seekers who are just escaping poverty and hunger. But that doesn’t help Italy as it tries to cope with a mounting influx of mainly economic migrants, who, under EU rule, it has little alternative but to admit, at least for processing and to save lives.

Paris has also scorned an Italian proposal for an EU military mission to monitor and interdict migrants along Libya’s southern border. Italians question why a large French military mission in Niger isn’t being used to disrupt migrant trafficking when it is right by the main route being used by smugglers and would-be asylum seekers traveling north. Last month, the European Parliament’s most senior left-wing politician, Italian Gianni Pittella, launched a scathing attack on Macron after French police frogmarched back into Italy more than 100 migrants who’d crossed into France. “The situation is shameful. Italy and the Italians are being abandoned, they’re being expected to deal with all these migrants on their own with no support,” he said.

I’ve said it before: help for refugees in fine, even though its distribution through NGOs is a colossal mess. But renting homes for refugees, and supplying them with money to live, is a huge blow in the face of the Greeks devastated by EU-induced austerity, who get nothing.

The European Commission announced a new emergency support package for Greece Thursday to help it deal with the refugee crisis that has seen tens of thousands of migrants and refugees stuck in the country. The €209 million ($243 million) package includes a €151 million program to help refugee families rent accommodation in Greek cities and provide them with money in an effort to help them move out of refugee camps, EU officials said during a visit to Athens. The Commission said the new funding more than doubles the emergency support extended to Greece for the refugee crisis, bringing it to a total of €401 million.

The rental project is in cooperation with the UN High Commissioner for Refugees and will provide 22,000 rental places with the aim of increasing the number of refugees living in rented apartments to 30,000 by the end of the year, including 2,000 places on Greek islands. A parallel scheme worth €57.6 million will provide refugees and asylum seekers with monthly cash stipends distributed through cash-cards for expenses such as transport, food and medication. “The projects launched today are one part of our wider support to the country but also to those in need of our protection,” said Migration Commissioner Dimitris Avramopoulos. “Around €1.3 billion of EU funds are at the disposal of Greece for the management of the migration crisis.”

Senate majority leader Mitch McConnell has announced that the Senate will vote on a clean repeal of Obamacare without any replacement, after two Republican senators broke ranks to torpedo the current Senate healthcare bill. Senators Mike Lee of Utah and Jerry Moran of Kansas came out on Monday night in opposition to McConnell’s Better Care Reconciliation Act (BCRA), the Senate version of the controversial healthcare reform bill that passed the House in May. Senate Republicans hold a bare 52-48 majority in the Senate and two members of the GOP caucus, the moderate Susan Collins of Maine and the libertarian Rand Paul of Kentucky, already opposed the bill, along with all 48 Democrats. The announcement from Moran and Lee made it impossible for Republicans to muster the 50 votes needed to bring the BCRA bill to the floor.

Instead, McConnell announced late on Monday night that the Senate would vote on a bill to simply repeal Obamacare without any replacement in the coming days. The Kentucky Republican said in a statement: “Regretfully, it is now apparent that the effort to repeal and immediately replace the failure of Obamacare will not be successful.” He added that “in the coming days” the Senate would vote on repealing the Affordable Care Act with a two-year-delay. The Senate passed a similar bill in 2015, which was promptly vetoed by Barack Obama. McConnell’s plan echoes a statement made by Donald Trump in a tweet on Monday night, in which the president urged a repeal of Obamacare with any replacement to come in the future. “Republicans should just REPEAL failing ObamaCare now & work on a new Healthcare Plan that will start from a clean slate. Dems will join in!” Trump wrote.

In January, an analysis by the nonpartisan Congressional Budget Office (CBO) estimated that repealing Obamacare without a replacement would result in 32 million people losing insurance by 2026, including 19 million who would lose Medicaid coverage. It would also cause premiums to rise by as much as 50% in the year following the elimination of key planks of the healthcare law, including the repeal of Medicaid expansion and cost-sharing subsidies. Premiums would nearly double over a decade.

When discussing Blackrock’s latest quarterly earnings (in which the company missed on both the top and bottom line, reporting Adj. EPS of $5.24, below the $5.40 exp), CEO Larry Fink made an interesting observation: “While significant cash remains on the sidelines, investors have begun to put more of their assets to work. The strength and breadth of BlackRock’s platform generated a record $94 billion of long-term net inflows in the quarter, positive across all client and product types, and investment styles. The organic growth that BlackRock is experiencing is a direct result of the investments we’ve made over time to build our platform.”

While the intention behind the statement was obvious: to pitch Blackrock’s juggernaut ETF product platform which continues to steamroll over the active management community, leading to billions in fund flow from active to passive management every week, if not day, he made an interesting point: cash remains on the sidelines even with the S&P at record highs. In fact, according to a chart from Credit Suisse, Fink may be more correct than he even knows. As CS’ strategist Andrew Garthwaite writes, “one of the major features of the US equity market since the low in 2009 is that the US corporate sector has bought 18% of market cap, while institutions have sold 7% of market cap.” What this means is that since the financial crisis, there has been only one buyer of stock: the companies themselves, who have engaged in the greatest debt-funded buyback spree in history.

Why this rush by companies to buyback their own stock, and in the process artificially boost their Eearning per Share? There is one very simple reason: as Reuters explained some time ago, “Stock buybacks enrich the bosses even when business sags.” And since bond investor are rushing over themselves to fund these buyback plans with “yielding” paper at a time when central banks have eliminated risk, who is to fault them. More concerning than the unprecedented coordinated buybacks, however, is not only the relentless selling by institutions, but the persistent unwillingness by “households” to put any new money into the market which suggests that the financial crisis has left an entire generation of investors scarred with “crash” PTSD, and no matter what the market does, they will simply not put any further capital at risk.

As to Fink’s conclusion that “investors have begun to put more of their assets to work”, we will wait until such time as central banks, who have pumped nearly $2 trillion into capital markets in 2017 alone, finally stop doing so before passing judgment.

When the average American family sits down to discuss buying a home they do not discuss buying a $125,000 house. What they do discuss is what type of house they “need” such as a three bedroom house with two baths, a two car garage, and a yard. That is the dream part. The reality of it smacks them in the face, however, when they start reconciling their monthly budget. Here is a statement I have not heard discussed by the media. People do not buy houses – they buy a payment. The payment is ultimately what drives how much house they buy. Why is this important? Because it is all about interest rates. Over the last 30-years, a big driver of home prices has been the unabated decline of interest rates. When declining interest rates were combined with lax lending standards – home prices soared off the chart. No money down, ultra low interest rates and easy qualification gave individuals the ability to buy much more home for their money.

[..] With this in mind let’s review how home buyers are affected. If we assume a stagnant purchase price of $125,000, as interest rates rise from 4% to 8% by 2027 (no particular reason for the date – in 2034 the effect is the same), the cost of the monthly payment for that same priced house rises from $600 a month to more than $900 a month – more than a 50% increase. However, this is not just a solitary effect. ALL home prices are affected at the margin by those willing and able to buy and those that have “For Sale” signs in their front yard. Therefore, if the average American family living on $55,000 a year sees their monthly mortgage payment rise by 50% it is a VERY big issue.

Assume an average American family of four (Ward, June, Wally and The Beaver) are looking for the traditional home with the white picket fence. Since they are the average American family their median family income is approximately $55,000. After taxes, expenses, etc. they realize they can afford roughly a $600 monthly mortgage payment. They contact their realtor and begin shopping for their slice of the “American Dream.” At a 4% interest rate, they can afford to purchase a $125,000 home. However, as rates rise that purchasing power quickly diminishes. At 5% they are looking for $111,000 home. As rates rise to 6% it is a $100,000 property and at 7%, just back to 2006 levels mind you, their $600 monthly payment will only purchase a $90,000 shack. See what I mean about interest rates?

College tuition hikes and the resulting increase in student debt burdens in recent years have caused a significant drop in homeownership among young Americans, according to new research by the Federal Reserve Bank of New York. The study is the first to quantify the impact of the recent and significant rise in college-related borrowing—student debt has doubled since 2009 to more than $1.4 trillion—on the decline in homeownership among Americans ages 28 to 30. The news has negative implications for local economies where debt loads have swelled and workers’ paychecks aren’t big enough to counter the impact. Homebuying typically leads to additional spending—on furniture, and gardening equipment, and repairs—so the drop is likely affecting the economy in other ways.

As much as 35% of the decline in young American homeownership from 2007 to 2015 is due to higher student debt loads, the researchers estimate. The study looked at all 28- to 30-year-olds, regardless of whether they pursued higher education, suggesting that the fall in homeownership among college-goers is likely even greater (close to half of young Americans never attend college). Had tuition stayed at 2001 levels, the New York Fed paper suggests, about 360,000 additional young Americans would’ve owned a home in 2015, bringing the total to roughly 2.9 million 28- to 30-year-old homeowners. The estimate doesn’t include younger or older millennials, who presumably have also been affected by rising tuition and greater student debt levels.

There’s a good chance the number of millennials kept from buying homes because of their student loans has only grown since the period the economists studied. As tuition has risen, total student debt has increased 13%, and every new class graduates with more student debt than the preceding one. The consequences could reverberate for decades as more young Americans are locked out of purchasing property, the primary way that U.S. households build wealth. With less wealth, millennials could cut their spending as they attempt to build up their net worth. The U.S. economy has historically depended on household spending for roughly 70% of its growth.

National Collegiate Funding (NCF) is an umbrella name for 15 trusts that collectively hold 800,000 private student loans, totaling some $12 billion in outstanding obligations. The only problem is that roughly $5 billion worth of those loans, or over 40%, are currently in default (and you thought auto delinquencies were bad). Now, ordinarily when a student defaults on their loan, NCF simply files a lawsuit in local or state court as a means for negotiating a settlement or payment plan with the borrower. Often times, NCF wins these cases automatically as the borrowers don’t even bother to show up for their court date. In cases like that, NCF can use their court victory to garnish wages and/or federal benefits from entitlement programs like Social Security which can haunt borrowers for decades.

That said, NCF is increasingly finding that, much like the subprime mortgage debacle from 10 years ago, student lending institutions apparently had a really hard time keeping tracking of paperwork over the years and/or processed deeply flawed contracts with incomplete ownership records and mass-produced documentation (who can forget that whole robo-signing catastrophe). As the New York Times points out today, student loans, much like mortgages, are often originated at large commercial banks before being sold to numerous other financial institutions and ultimately ending up in a securitization owned by some unsuspecting European pension funds. And while pooling these student loans in such a complicated way into securitizations apparently magically eradicates all default risk associated with the underlying loans (just ask any 22 year old on the JPM securitization desk and he/she will confirm the same), it also makes it extremely difficult to prove ownership.

Students should not try to pay off their loans early despite the controversial interest rate rise to 6.1% in September, according to research by money expert Martin Lewis. Lewis says his moneysavingexpert.com website has been “swamped” by graduates terrified by new statements that show their debt spiralling in size after interest is added. He believes most graduates will never repay their debt. Lewis said: “Many graduates are starting to panic. First they look in shock at their student loan statements after noticing interest totalling thousands has been added. Then they read the headline interest rate for the 2017-18 academic year will increase from 4.6% to 6.1%. It’s no surprise I’ve been swamped with people asking if they should be trying to overpay the loans to reduce the interest.”

But after crunching the numbers, Lewis estimates that “overpaying is just throwing money away” unless the graduate is likely to be in very high-paid employment all their lives. Only if the student lands a job earning £40,000 a year on graduation, and then enjoys big pay rises after, should they consider repaying their loan early, said Lewis. A graduate earning £36,000 a year will repay £40,500 of a £55,000 total student loan over 30 years, said Lewis, at the current repayment rates. The remaining debt will be wiped clean after 30 years. If the same graduate cuts the total £55,000 balance to £45,000 with an overpayment of £10,000, they will still have to repay the same amount of student loan over 30 years, making the overpayment entirely pointless.

It’s classic subprime: hasty loans, rapid defaults, and, at times, outright fraud. Only this isn’t the U.S. housing market circa 2007. It’s the U.S. auto industry circa 2017. A decade after the mortgage debacle, the financial industry has embraced another type of subprime debt: auto loans. And, like last time, the risks are spreading as they’re bundled into securities for investors worldwide. Subprime car loans have been around for ages, and no one is suggesting they’ll unleash the next crisis. But since the Great Recession, business has exploded. In 2009, $2.5 billion of new subprime auto bonds were sold. In 2016, $26 billion were, topping average pre-crisis levels, according to Wells Fargo. Few things capture this phenomenon like the partnership between Fiat Chrysler and Banco Santander.

Since 2013, as U.S. car sales soared, the two have built one of the industry’s most powerful subprime machines. Details of that relationship, pieced together from court documents, regulatory filings and interviews with industry insiders, lay bare some of the excesses of today’s subprime auto boom. Wall Street has rewarded lax lending standards that let people get loans without anyone verifying incomes or job histories. For instance, Santander recently vetted incomes on fewer than one out of every 10 loans packaged into $1 billion of bonds, according to Moody’s. The largest portion were for Chrysler vehicles.

Some of their dealers, meantime, gamed the loan application process so low-income borrowers could drive off in new cars, state prosecutors said in court documents. Through it all, Wall Street’s appetite for high-yield investments has kept the loans – and the bonds – coming. Santander says it has cut ties with hundreds of dealerships that were pushing unsound loans, some of which defaulted as soon as the first payment. At the same time, Santander plans to increase control over its U.S. subprime auto unit, Santander Consumer USA Holdings, people familiar with the matter said.

Perhaps the biggest outcome from the weekend Conference was the creation of a financial “super-regultor” meant to tackle the growing threat of a financial crisis, and among its broad conclusions were i) To make finance better serve the real economy; ii) To contain financial risks; and iii) To deepen financial reforms. The proposed reforms are the result of the unprecedented increase in overall Chinese debt, which while promoting growth – in this case China’s latest 6.9% GDP print – is also leading to a relentless buildup of risks. And while until now Chinese regulators had homed in on financial-sector excesses, the latest probe – Bloomberg notes – is now widening to debt in the broader economy, “a shift that prompted a sell-off in domestic stocks.”

There was another reason for the market’s swoon. Earlier on Monday China People’s Daily newspaper warned of potential “gray rhinos” which it defined as “highly probable, high-impact threats that people should see coming, but often don’t.” So in a surprising case of forward-looking prudence, the Chinese government is doing what numerous Fed members have also done in recent weeks, by setting a surprisingly wary tone about risk, demonstrated best by the front page commentary in the People’s Daily, which said China should not only be alert to “black swan” risks that catch people off guard but also more obvious threats, citing cited a term popularized by author Michele Wucker’s book “The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore.”

Noting that with the economy still on a slowing-growth trend, the People’s Daily commentary said that China should “strictly prevent risks from liquidity, credit, shadow banking and abnormal capital market fluctuations, as well as insurance market and property bubbles.” And, as Bloomberg adds, the new focus on “deleveraging in the economy” suggests that local-government and state-owned enterprise debt is now very much in the spotlight. In other words, this time Beijing’s crackdown on excess debt may actually be real. Of course, by now it is widely understood that China’s strong (credit-driven) momentum has fueled global economic expansion and boosted sentiment in international markets, and served as the springboard for the global economic rebound in the depths of the financial crisis (when China’s debt load was roughly half the current one).

[..] In a separate commentary by China Daily, the official English-language newspaper added that fending off risks is one of the country’s top priorities, with corporate debt running high, the property market being overheated and excess capacity in some sectors lingering, adding that “only through guarding against financial risks can a sound and stable financial sector better fulfill its duty and purpose of serving the real economy.” While it is admirable that China continues to push for deleveraging, it faces an uphill battle, not least of all because as the IIF recently calculated, China’s debt is not only the biggest contributor to global debt growth, currently at a record $217 trillion, but as of 2017 is at just over 300% debt/GDP. Meanwhile, the marginal benefit of all this debt continues to shrink, with the Chinese economy growing at levels just shy of all time lows.

Half of Chinese millionaires are considering moving overseas, and the U.S. remains their favorite destination, according to a new survey. Among Chinese millionaires with a net worth of more than $1.5 million, half either plan to or are considering moving abroad, according to a survey from Hurun Report in association with Visas Consulting Group. The survey suggests that the flow of wealthy Chinese and Chinese fortunes into U.S. homes and buildings is likely to continue, helping demand and prices in certain real estate markets — especially in the U.S. The U.S. remains the most popular destination for wealthy Chinese moving their families and fortunes abroad, according to the report. Canada ranks second, overtaking the U.K., which had ranked second but now ranks third. Australia comes in at fourth.

The favorite city for wealthy Chinese moving to the U.S. is Los Angeles, while Seattle ranks second followed by San Francisco. New York ranked fourth. When asked for their main reasons for moving abroad, education was the top reason, followed by the “living environment.” “Education and pollution are driving China’s rich to emigrate,” said Rupert Hoogewerf, chairman and chief researcher of Hurun Report. “If China can solve these issues, then the primary incentive to emigrate will have been taken away.” Yet the fear of a falling Chinese currency is also driving many rich Chinese — and their money — abroad. Fully 84% of Chinese millionaires are concerned about the devaluation of the yuan, up from 50% last year. Half are worried about the exchange rate of the dollar, foreign exchange controls and property bubbles in China.

In the year 2000, Japan, the USA and Australia all had about the same ratio of household debt to GDP – in each country, this figure was about 70%. In Japan, the ratio fell gradually from 70% to the low 60%, and has remained at about 62% for a while. In the US, household debt surged as financial fragility grew, with the ratio peaking at 98% in the first quarter of 2008. Households deleveraged post GFC, and the ratio fell back to about 80%. Till way too high for another surge in private debt to be allowed to persist, but at least well below its level at the peak of the bubble. What about Australia? Like Japan and the US, our household debt to GDP stood at about 70% at the millennium – well above the levels of previous years. It then grew and grew, mainly due to increasing mortgage debt, standing at 108% in mid-2008.

Well above the level in the US when the crash happened there. As we know, Australia missed the worst of the GFC, and propped up its housing market, and household debt just kept growing. By the end of last year it was above 123%, placing Australia very near the top of the global league table. Bound to lead to a crash? Many would say so – Steve Keen and Philip Soos amongst them, and who am I to disagree? Unwise? On that we should all agree. And done at the urging of successive governments which have failed to run appropriate fiscal policies; with the approval, for most of this period, of the RBA; and with the acquiescence of what until quite recently was a very relaxed APRA. Who has the debt problem? Not Japan. Since around 2013, The Bank of Japan began buying up government debt, to become a monopoly supplier of bank reserves, denominated in Yen.

In September 2016 it took the decision to buy unlimited amounts of Japanese government bonds at a fixed-yield, meaning it could control yields across bond maturities from a two-to-40-year output and sets them at whatever level they choose. It also implemented $80 trillion worth of quantitative and qualitative easing while introducing a negative interest rate of minus 0.1% to current accounts held by financial institutions at the bank, driving the bond yield rate down. Bond market dealers queued up to get their hands on as much Japanese government debt as they could, with the promise it would mature within 40 years. To quote Economist Bill Mitchell: “The bond markets do not have the power to set yields unless the government allows them that flexibility. The government rules, not the markets.” Moreover, Japan’s government doesn’t need to issue debt in primary markets in order to spend. Because monetary sovereign government debt is not the problem. Household debt is the problem.

[..] this blog might be described as anti-Trump, too, in the sense that I did not vote for him and regularly inveigh against his antics as President — but neither is Clusterfuck Nation a friend of the Hillary-haunted Dem-Prog “Resistance,” in case there’s any confusion about where we stand. If anything, we oppose the entirety of the current political regime in our nation’s capital, the matrix of rackets that is driving the aforementioned Limousine-of-State off the cliff of economic collapse. Just sayin’. “Resistance” law professors, such as Lawrence Tribe at Harvard, were quick to holler “treason” over Junior’s meet-up with Russian lawyer Natalia Veselnitskaya and Russian-American lobbyist Rinat Akhmetshin. Well, first of all, and not to put too fine a point on it, don’t you have to be at war with another nation to regard any kind of consort as “treason?”

Last time I checked, we were not at war with Russia — though it sure seems like persons and parties inside the Beltway would dearly like to make that happen. You can’t call it espionage either, of course, because that would purport the giving of secret information, not the receiving of political gossip. Remember, the “Resistance” is not going for impeachment, but rather Section 4 of the 25th Amendment. That legal nicety makes for a very neat-and-clean surgical removal of a whack-job president, without all the cumbrous evidentiary baggage and pain-in-ass due process required by impeachment. All it requires is a consensus among a very small number of high officials, who then send a note to the leaders in both houses of congress stating that said whack-job president is a menace to the polity — and out he goes, snippety-snip like a colorectal polyp, into the hazardous waste bag of history.

And you’re left with a nice clean asshole, namely Vice President Mike Pence. Insofar as Pence appears to be a kind of booby-prize for the “Resistance,” that fateful reach for the 25th Amendment hasn’t happened quite yet. It is hoped, I’m sure, that the incessant piling on of new allegations about “collusion” with the Russians will get the 25thers over the finish line and into the longed-for end zone dance. More interestingly, though, the meme that has led people to believe that any contact between Russians and Americans is ipso facto nefarious vectors into the very beating heart of the “Resistance” itself: the Clintons.

How come the Clintons have not been asked to explain why — as reported on The Hill blog — Bill Clinton was paid half a million dollars to give speech in Russia (surely he offered them something of value in exchange, pending the sure thing Hillary inaugural), or what about the $2.35 million “contribution” that the Clinton Foundation received after Secretary of State Hillary allowed the Russians to buy a controlling stake in the Uranium One company, which owns 20% of US uranium supplies, with mines and refineries in Wyoming, Utah, and other states, as well as assets in Kazakhstan, the world’s largest uranium producer? Incidentally, the Clinton Foundation did not “shut down,” as erroneously reported early this year. It was only its Global Initiative program that got shuttered. The $2.35 million is probably still rattling around in the Clinton Foundation’s bank account. Don’t you kind of wonder what they did with it? I hope Special Prosecutor Robert Mueller wants to know.

Humans have a virtually unlimited capacity for self-delusion, even when self-preservation is at stake. The scariest example is the simplistic, growth-oriented, market-based economic thinking that is all but running the world today. Prevailing neoliberal economic models make no useful reference to the dynamics of the ecosystems or social systems with which the economy interacts in the real world. What truly intelligent species would attempt to fly spaceship Earth, with all its mind-boggling complexity, using the conceptual equivalent of a 1955 Volkswagen Beetle driver’s manual? Consider economists’ (and therefore society’s) near-universal obsession with continuous economic growth on a finite planet.

A recent ringing example is Kaushik Basu’s glowing prediction that “in 50 years, the world economy is likely (though not guaranteed) to be thriving, with global GDP growing by as much as 20% per year, and income and consumption doubling every four years or so.” Basu is the former chief economist of the World Bank, senior fellow at the Brookings Institution and professor of economics at Cornell University, so he is no flake in the economics department. But this does not prevent a display of alarming ignorance of both the power of exponential growth and the state of the ecosphere. Income and consumption doubling every four years? After just 20 years and five doublings, the economy would be larger by a factor of 32; in 50 years it will have multiplied more than 5000-fold! Basu must inhabit some infinite parallel universe.

In fairness, he does recognize that if the number of cars, airplane journeys and the like double every four years with overall consumption, “we will quickly exceed the planet’s limits.” But here’s the thing — it’s 50 years before Basu’s prediction even takes hold and we’ve already shot past several important planetary boundaries. Little wonder. Propelled by neoliberal economic thinking and fossil fuels, techno-industrial society consumed more energy and resources during the most recent doubling (the past 35 years or so) than in all previous history. Humanity is now in dangerous ecological overshoot, using even renewable and replenishable resources faster than ecosystems can regenerate and filling waste sinks beyond capacity. (Even climate change is a waste management problem — carbon dioxide is the single greatest waste by weight in all industrial economies.)

Meanwhile, wild nature is in desperate retreat. One example: from less than one% at the dawn of agriculture, humans and their domestic animals had ballooned to comprise 97% of the total weight of terrestrial mammals by the year 2000. That number is closer to 98.5% today, with wild mammals barely clinging to the margins. The “competitive displacement” of other species is an inevitable byproduct of continuous growth on a finite planet. The expansion of humans and their artefacts necessarily means the contraction of everything else. [..] Ignoring overshoot is dangerously stupid — we are financing growth, in part, by irreversibly liquidating natural resources essential to our own long-term survival.

I took up surfing in my early 30s. It didn’t last long. But I learned a tremendous amount from the experience (least of which is that I suck at surfing). Well, it’s time to think like a surfer. Your sole focus is to catch the wave. The best surfers can see the waves building, just like we can in the markets, but they only care about where the biggest, best waves will crash. That’s where you get the ride. And if you catch the biggest wave in the right place, you get the ride of a lifetime. Look at this fourth and largest wave building in the stock market. It’s the wave of a lifetime for investors, and it’s rolling onto our shores right about now… Remember, all the action comes when the wave crashes, not as it’s building. As the swell grows around you, you can go with the flow and harness the energy of the wave with little effort.

That’s when you become one with the universe, sitting there on your board, surrounded by dark water, rolling up and down as the power builds beneath you. That’s why surfers get addicted. Then, at the perfect moment, all the wave’s pent up energy releases in a roaring spray of water and power. That’s where we want YOU to be when the greatest market wave of your lifetime comes crashing to shore! That’s when the greatest profits come. That’s when the greatest innovations spring up. The smartest people (I include surfers in this group) and the greatest innovators understand this. They don’t look at a good economy as the best opportunity for success. Seeds of radical innovation only grow in the most challenging conditions.

One month after we, and every other financial media, reported that US credit card debt had risen back over $1 trillion for the first time since January 2017, the Fed demonstrated just how meaningless such reports are when in its latest consumer credit report it revised the total stock of revolving debt back under $1 trillion for the month of March, while boosting December’s amount to $1,000.1 billion, meaning that all those “$1 trillion in credit card” debt headlines were about 4 months late. Fed screwing around with the financial reporters aside, the latest monthly report showed that total consumer credit rose by $16.4 billion, more than the $14 billion expected, an increase which was offset by a downward revision to the February consumer credit number from $15.2 billion to $13.8 billion. Revolving credit accounted for $2 billion of the increase with the rest, or $14.4 billion, in the form of auto and student loans.

And speaking of student and auto loans, the Fed also released its latest quarterly estimate for the two series as of March 31, and as one would expect, the numbers rose to new all time highs, and as of the end of the first quarter, US consumers owed $1.44 trillion in student loans, an increase of $32 billion for the quarter and $80 billion for the year, as well as $1.12 trillion in auto loans, an increase of $8 billion Q/Q and $73 billion Q/Q. This means that as of March 31, Americans owed two and a half times as much on their auto and student loans, as on their credit cards, a new all time high.

A wave of regulations aimed at cutting risk in China’s financial system is rippling through the country’s markets and sending banks and companies scrambling for funds. During the past month, Chinese shares have fallen nearly 5%, draining almost half a trillion dollars out of the country’s markets. Bond yields have shot up to their highest levels in two years, and bond defaults hover at record levels. The uncertainty has also weighed on metals and commodity prices, already hurt by doubts around China’s growth momentum. The price of iron ore plunged 8% on Thursday, the daily trading limit. Investors blame the volatility on a host of measures Chinese authorities have rolled out to curb runaway debt levels, from raising the cost of short-term funds to measures that are prompting banks to unwind hidden loans and securities.

A particular target is high-risk, high-yielding investment products that banks have used to boost returns, but that regulators say may conceal dangerous amounts of risky lending. Regulators are responding to prodding from Chinese President Xi Jinping, who issued a call for financial stability ahead of a major power reshuffle later this year, and just last week warned finance officials not to miss “a single risk” or “hidden danger.” The market turbulence will test Beijing’s resolve in tackling China’s snowballing debt, especially if it looks like regulators’ crackdown is jeopardizing short-term growth. If they can withstand the short-term squeeze and continue to push it through, the effort will help put China’s economy on a sounder footing longer-term. Banks—especially small and midsize lenders—sell the risky investment products to Chinese savers, then lend the funds to outside asset managers who invest them in bonds, stocks and loans.

The lenders make money from the difference between what they pay their investment clients and what they get from the outside managers. But since these products aren’t logged as loans or other assets on their balance sheets, banks have to set aside little or nothing for potential losses associated with them. That leaves banks more exposed to risk and shows their financial position as stronger than it really is. The maneuvering also encourages leveraged purchases of securities by asset managers and enables banks to continue funding troubled customers, such as property developers with excess inventory and bloated steelmakers. Such grey-area investments reached nearly 20 trillion yuan ($2.8 trillion) at the end of last year, says Fitch Ratings, or about 26% of China’s GDP in 2016, up from less than 10% three years earlier. They now represent an average of 19% of small and midsize banks’ total assets, compared with about 1% for big state banks, according to Fitch.

The way it works now, the so-called “providers” (doctors, hospitals) refuse to post the cost of any service, and then charge whatever they feel they can extract, subject to an abstruse and dishonest ceremonial “negotiation” with the insurance company. The result: hospital and insurance executives get paid multi-million dollar salaries, doctors get to drive fine German cars, and the patient gets financially ass-raped, kicked to the curb, and eventually stuffed into the bankruptcy courts. ObamaCare did nothing to fix this. It just added more victims to the rolls and upped the price of admission for a personal financial ass-raping, so that an insured individual could go to the hospital for an emergency appendectomy and end up getting dunned for thousands of dollars — or even more if one of the hosptial’s favorite cute scams is applied, such as calling in an out-of-network anesthesiologist to knock you unconscious (in which state you are unlikely to inquire whether he/she/zhe is in-network or out).

Under the current system, a hospital can bill you $5,999 to stitch up a cut finger, mitigate a bee-sting, or wind an Ace bandage around a sprained ankle, and you’re sure not to learn the cost-of-treatment until the postman drops off the incomprehensible “explanation of benefits” from the insurance company that states in bold print on top “This Is Not a Bill,” but actually is a report of your own incipient financial ass-raping. But judging from the news reports this day, none of these issues is actually on the table in the congressional debate. I don’t believe the editors of The New York Times are necessarily “in bed” with the overpaid hospital CEOs and the insurance company fraudsters. They are simply putting up a defense of their previous psychological investment in Democratic Party ideology — in the shibboleth that ObamaCare was unquestionably a great thing because it was created under the magically empowered 44th president.

I can believe that both Democratic and Republican law-makers are not only in bed with the medical fraudsters of all categories, but are performing a particularly odious form of sadomasochistic bondage-and-discipline sex in exchange for payoffs. Note, too, that none of the aforementioned major media have reported what the medical and insurance lobbyists have paid to their rent-boys and doxies in the US capitol. Wouldn’t you like to know?

The preference for high theory and abstruse mathematical modeling meant that mainstream economics had come to rest on a number of gloriously improbable assumptions. In their models, millions of households were reduced to a single “representative agent,” a God-like being, omniscient and immortal. This unreal creature inhabited a world where peace – or equilibrium – ruled. Crises were impossible in such an Eden, unless a mischievous serpent entered from abroad. But such an outcome was naturally impossible to predict. Both Romer and Keen agree that the most serious error of modern macroeconomics is that it ignores finance. Money is seen as a “veil” placed over the activities of the real economy, a mere contrivance to get around the inconveniences of barter.

Minsky, by contrast, saw capitalism as a financial system in which millions of balance sheets and cash flows were intertwined in a highly complex fashion. Money and credit are the essence of capitalism: economic transactions can only take place after financing. The trouble is that credit is inherently unstable, prone to expand excessively and to inflate asset price bubbles, which in time collapse, causing a cascade of defaults throughout the economy. In Minsky’s world, the tail of finance wags the real economy dog. Anyone who paid serious attention to credit, as Keen did prior to 2008, could hardly have failed to notice that something was amiss. After all, credit was growing very rapidly in the United States, in Australia and across much of Europe. Keen’s own contribution at the time was to point out that it wouldn’t take a collapse of credit to cause a serious economic downturn – a mere slowdown in the rate of lending would do the job.

This prediction was vindicated in 2008, when credit growth slowed sharply but remained positive, sending the U.S. economy into a tailspin. Keen is now calling for the dominant macroeconomic models to be jettisoned and replaced by ones that take account of credit. In his book, he develops a simple credit-based macro model. The economists at the Bank for International Settlements have constructed a “financial cycle” model along similar lines. In the end, the money-free macro models appear doomed. Yet progress has been painfully slow to date. As Max Planck said, science advances one funeral at a time – failing death, retirement would do the trick.

So what of the next crisis? With his eye on credit growth, Keen sees China as a terminal case. The People’s Republic has expanded credit at an annualized rate of around 25 per cent for years on end. Private-sector debt exceeds 200 per cent of GDP, making China resemble the over-indebted economies of Ireland and Spain prior to 2008, but obviously far more significant to the global economy. “This bubble has to burst,” writes Keen unequivocally.

It is now incontestable that Germany benefits greatly from the Euro. The weaker members of the Euro drag down the external value of the Euro compared with the US Dollar making German exports far more competitive than they would otherwise be. Despite the relative value of the Euro being lower than would be the case if the Euro was the currency of Germany alone, the Euro’s value relative to the Dollar is still significantly higher than would be the case were the Euro the currency of an independent Greece or France.

In Purchasing Power Parity (PPP) terms the Euro in Germany is some 32% undervalued compared with the Greek Euro, greatly benefiting German exporters, but imposing a burden on Greek exporters that they must find impossible to cope with. Conversely the overvaluation facing French companies is now a clear 20% compared with German companies.

Brazil and Argentina suffer from overvalued currencies against the US Dollar, suggesting one reason for the serious recession suffered by South America’s biggest economies over the past year. In contrast Canada, Russia, China, Mexico, Turkey and India all have currencies between 15% and 44% undervalued against the US Dollar, suggesting that at least some of Mr Trump’s rhetoric is justified. Over time these fundamental disparities have not shrunk, they have in fact widened. The charts to the upper right show the trend of German undervaluation against the French and Greek Euro’s in Purchasing power terms.

[..] there is a structural problem in the eurozone, and in the EU. The ECB, the European Commission, and the IMF (which is not an independent entity but generally answers to its European directors for decisions affecting Europe), are the European authorities that have increasingly constrained the economic decision-making of European governments. We can also include the eurogroup of finance ministers, which has tormented poor Greece and helped prolong that country’s interminable economic crisis. These people have shown that they are committed to creating a different kind of Europe. This can be seen in a paper trail of thousands of pages of documents, called Article IV consultations, where the IMF and EU government finance ministries hammer out their views on economic policies. These documents represent an elite consensus which can differ greatly from public opinion within the countries.

A review of 67 of these agreements for the four years 2008 through 2011, for 27 EU countries, showed a clear pattern of policy choices: cutting government spending, including on health care and pensions; increasing labor supply; reducing public sector employment; and changes in labor law that would reduce the scope of collective bargaining. This is the economic program that any politician or political party who does not want to be labeled as “anti-Europe” must adhere to, and it can be seen in the most recent (July 2016) IMF Article IV consultation for France, as well as the Stability Program that France has agreed to with the EU. These documents see France as freezing real spending, and committing to reducing its budget deficit to zero by 2021. These commitments imply that the French government can do nothing to reduce mass unemployment, which has averaged about 10% over the past year.

Although the major Western media portrays the EU authorities’ policies as the only sensible course, in economic terms, it is anything but. With France’s real borrowing costs near zero and inflation well below target, it makes sense for France to implement an economic stimulus, for example by increasing public investment. Fears of increasing the French public debt are unfounded; annual interest payments on that debt are currently at about 1.7% of GDP, a modest burden by any historical or international comparison.

[..] Since the 2008–09 world financial crisis and recession, the project of the eurozone, and to some extent of the EU, has created a destructive feedback loop that leads directly to the kind of dysfunctional politics now unfolding in France. It is one thing to give up some national sovereignty for a common project that can raise common living standards; it is quite another to surrender a country’s most important macroeconomic decision-making (monetary, exchange rate, and increasingly fiscal policy) to unaccountable authorities who have demonstrated their commitment to a regressive agenda. The Center Left’s collaboration with this program, e.g., President Hollande’s in France, has given the Far Right opportunities not seen since the 1930s.

French presidential candidate Emmanuel Macron’s campaign team says it has been the victim of a massive and coordinated hacking operation. A large trove of emails from the campaign of French presidential candidate Emmanuel Macron was posted online late on Friday, 1-1/2 days before voters go to the polls to choose the country’s next president in a run-off against far-right rival Marine Le Pen. Some nine gigabytes of data were posted by a user called EMLEAKS to Pastebin, a document-sharing site that allows anonymous posting. It was not immediately clear who was responsible for posting the data or whether the emails were genuine. In a statement, Macron’s political movement En Marche! (Onwards!) confirmed that it had been hacked.

“The En Marche! Movement has been the victim of a massive and co-ordinated hack this evening which has given rise to the diffusion on social media of various internal information,” the statement said. An interior ministry official declined to comment, citing French rules which forbid any commentary liable to influence an election, and which took effect at midnight French time on Friday (2200 GMT). Comments about the email dump began to appear on Friday evening just hours before the official ban on campaigning began. The ban is due to stay in place until the last polling stations close on Sunday at 8 p.m. (1800 GMT).

The title of a comment piece which appeared in The Guardian, the UK voice of the anti-Assange-pro-Hillary liberal left, says it all: “Le Pen is a far-right Holocaust revisionist. Macron isn’t. Hard choice?” Predictably, the text proper begins with: “Is being an investment banker analogous with being a Holocaust revisionist? Is neoliberalism on a par with neofascism?” and mockingly dismisses even the conditional leftist support for the second-round Macron vote, the stance of: “I’d now vote Macron – VERY reluctantly.” This is liberal blackmail at its worst: one should support Macron unconditionally; it doesn’t matter that he is a neoliberal centrist, just that he is against Le Pen. It’s the old story of Hillary versus Trump: in the face of the fascist threat, we should all gather around her banner (and conveniently forget how her side brutally outmanoeuvred Sanders and thus contributed to losing the election).

Are we not allowed at least to raise the question: yes, Macron is pro-European – but what kind of Europe does he personify? The very Europe whose failure feeds Le Pen populism, the anonymous Europe in the service of neoliberalism. This is the crux of the affair: yes, Le Pen is a threat, but if we throw all our support behind Macron, do we not get caught into a kind of circle and fight the effect by way of supporting its cause? This brings to mind a chocolate laxative available in the US. It is publicised with the paradoxical injunction: “Do you have constipation? Eat more of this chocolate!” – in other words, eat the very thing that causes constipation in order to be cured of it. In this sense, Macron is the chocolate-laxative candidate, offering us as a cure for the very thing that caused the illness.

[..] In the hopeless situation we are in, facing a false choice, we should gather the courage and simply abstain from voting. Abstain, and begin to think. The commonplace “enough talking, let’s act” is deeply deceiving – now, we should say precisely the opposite: enough of the pressure to do something, let’s begin to talk seriously, ie, to think! And by this I mean we should also leave behind the radical leftist self-complacency of endlessly repeating how the choices we are offered in the political space are false, and how only a renewed radical left can save us – yes, in a way, but why, then, does this left not emerge? What vision has the left to offer that would be strong enough to mobilise people? We should never forget that the ultimate cause of the act that we are caught into – the vicious cycle of Le Pen and Macron – is the disappearance of the viable leftist alternative.

The English language is losing importance in Europe, the president of the European commission has said amid simmering tensions over the Brexit negotiations. Speaking to an audience of European diplomats and experts in Florence, Jean-Claude Juncker also described the UK’s decision to leave the EU as a tragedy. “Slowly but surely English is losing importance in Europe,” Juncker said, to applause from his audience. “The French will have elections on Sunday and I would like them to understand what I am saying.” After these opening remarks in English, he switched to French for the rest of the speech. Making a stout defence of the EU, Juncker said the UK had voted to leave the project despite historic successes and a recent uptick in economic growth. “Our British friends decided to leave the EU, which is a tragedy,” he said.

[..] It is not the first time the English language has been caught in the crossfire of the Brexit negotiations. At a recent EU summit May slapped down reports that Brexit negotiations would be conducted in French, and after the June referendum EU officials made it known they planned to downgrade the use of English in the corridors of Brussels. In reality, the Brexit talks are most likely to be conducted in French and English with simultaneous interpretation. Barnier, a former French EU commissioner who clashed with the City of London, speaks English but wants the right to negotiate in his native tongue. English is also highly unlikely to disappear as a dominant language in the EU any time soon. Not only is it an official language for the Irish and Maltese governments, but many diplomats prefer to use English as a common second language rather than French.”

No debt relief measures are being readied for Greece, Germany’s Finance Ministry said on Thursday after the Handelsblatt business daily reported measures were under consideration. The implementation of reforms that Greece agreed to in return for aid would help ensure the sustainability of the country’s debt, the ministry said in a statement e-mailed to Reuters. “No debt relief is being prepared,” it added. Regarding possible debt measures, a clear agreement was reached in a statement by the Eurogroup of eurozone finance ministers last May. “According to that, after the full implementation of the adjustment program, there will be an assessment of whether debt measures are necessary. That still applies,” it said. Earlier, Handelsblatt reported that Greece’s international lenders were preparing possible debt relief for Athens for discussion by the finance ministers.

The European Commission, the ESM eurozone rescue fund, the ECB and the IMF had prepared various debt measures in a document to be sent to the Eurogroup for further discussion, it said, citing people familiar with the document. One option was for the ESM to take over loans paid out by the IMF. The advantage would be lower interest rates charged by the ESM. Others included extending debt maturities and having the ECB and national central banks send profits made on Greek bonds to Athens through national governments, Handelsblatt reported. An EU source told Reuters the document was originally a paper by the ESM, not all four institutions, and had been modified on the way to the version Handelsblatt saw.

“It lays down several options for the restructuring of Greek debt and specifies possibilities which were given by the Eurogroup last May. One of the options still is that ESM would take debt from IMF,” the source said. “It is not clear yet if the IMF would agree on that.” Separately, German Finance Minister Wolfgang Schaeuble said in Durban, South Africa that the EU needed to “exert pressure on national governments to implement … much-needed reforms.” “Those countries which received help under European assistance programmes, and therefore had to actually implement unpleasant reforms, and those countries which have kept to the agreed rules are among the most successful countries in the EU today,” he said. “The problem is therefore not with the rules, but with the lack of implementation of them.

Cinco de Mayo celebrates the victory of Mexican troops over the invading French army at the Battle of Puebla southeast of Mexico City on May 5, 1862. Because the Mexican soldiers were badly outnumbered and outgunned, the unexpected triumph was a watershed in forging the country’s national identity. (Militarily it wasn’t that significant — the next year France captured the Mexican capital and installed a member of the Austrian nobility as Maximillian I, “Emperor of Mexico.”) But here’s important part for everyone else to remember today: France was invading Mexico essentially because Mexico owed France money. Mexico had borrowed enormous amounts from Europe during the Mexican-American War from 1846-8 and in a civil war from 1858-61.

By 1862 it was impossible for the government to make timely payments on the loans without starving the country, and Mexican president Benito Juárez declared that all payments on foreign debt would be suspended for two years. Getting into unsustainable debt is not something unique to Mexico; countries have done so over and over throughout history, particularly during wars. The U.S. borrowed more than we could ever repay from France and the Netherlands during the Revolutionary War, and the U.K. borrowed far beyond its means from the U.S. during World War I. When this happens, it’s far better for both the debtors and creditors to organize some kind of default rather than forcing the debtors to pay all the money back on the original terms. The advantage for debtors is obvious.

More intelligent creditors understand it’s also good for them, because they generally don’t have a choice between getting all or just some of their money back. Instead, it’s a choice between getting some of it back or much less. To understand why, imagine loaning too much money to a software engineer. If you demand that the engineer sell all their computers to make interest payments, you’re unlikely to get much more money after that. And indeed both the U.S. and U.K. defaulted to varying degrees after their wars. Likewise, in 1862 the U.K. and Spain agreed to accept less than they were formally owed by Mexico. France, however, invaded Mexico in an attempt to get all its money back, which is why French troops were there for the Battle of Puebla on May 5.

In a sense, the invasion was admirably honest. International relations are often like organized crime on a gigantic scale, but people pretend otherwise. Here there was no pretense: The loanshark’s enforcers beat the crap out of an entire country. By contrast, creditors today have institutions like the IMF, which has often functioned as a creditors’ cartel — squeezing countries until they pay back their debts. This often involves lots of people dying … but in quiet ways, without armies involved.

Rescuers picked up 560 migrants from unsafe boats off the coast of Libya on Thursday, Italy’s Coast Guard said, including the body of a young man who the migrants said had been shot by smugglers on the beach for his baseball cap. Italian Navy and Coast Guard boats participated in the rescues together with two humanitarian vessels, a spokesman said. The migrants were traveling on board two large rubber boats and five small wooden ones, he added. The Phoenix, a rescue ship operated by the Migrant Offshore Aid Station (MOAS), took 422 on board, plus the body of the allegedly murdered young Gambian. “According to eyewitnesses, the deceased teenager was killed by human traffickers because they wanted his baseball hat. What cruelty,” MOAS co-founder Chris Catrambone said.

“The medical team onboard the Phoenix have confirmed that the deceased teenager died from gunshot wound,” he added. MOAS doctors are also caring for another teenage boy who has a gunshot wound to the stomach, but is stable. German NGO Jugend Rettet also helped with the rescues. Separately, Doctors Without Borders said its rescue ship Prudence would arrive in the Sicilian port of Catania early on Friday with the corpses of six migrants, including five women, who it had picked up in the Mediterranean in recent days. There had been a pause of boat departures from Libya, where smugglers operate with impunity, since Easter, because of bad weather and sea conditions. But boat migrant arrivals in Italy are still up 30 percent so far this year from 2016, when a record 181,000 arrived.

Humanitarian rescue ships have come in for criticism in Italy in recent months, with Catania chief prosecutor Carmelo Zuccaro opening a fact-finding investigation into possible ties between NGOs and people-smugglers. The NGOs have strongly denied the accusations, including representatives from MOAS who testified in Italy’s parliament earlier on Thursday. They say their only mission is to save lives. Zuccaro has yet to present any evidence of illicit activities and has not opened a criminal investigation.

Several key Senate Republicans said they will set aside the narrowly passed House health-care bill and write their own version instead, a sign of how difficult it will be to deliver on seven years of promises to repeal Obamacare. Lamar Alexander of Tennessee, who chairs the Senate health committee, and Roy Blunt of Missouri, a member of GOP leadership, both described the plan, even as the House was celebrating passing its repeal after weeks of back and forth. The decision will likely delay even further the prospect of any repeal bill reaching President Donald Trump’s desk. Hospital stocks dipped on the House vote, but quickly bounced back on the news the Senate would start over with its own version, with the BI North America Hospitals Index up 0.9% at 2:39 p.m. Hospitals fear the winding-down of Obamacare’s Medicaid expansion will leave them with more customers who can’t afford to pay.

Trump celebrated the House vote with a news conference at the White House, standing alongside dozens of Republican lawmakers. “This has really brought the Republican Party together,” he said. But in the wake of the House’s razor-thin 217-213 vote, the Senate made clear it was going in a different direction. Alaska’s Lisa Murkowski, who has been very critical of the House bill, said Thursday she hopes they start with “a clean slate” in the Senate. To get some kind of bill through his chamber, Majority Leader Mitch McConnell will need to unite moderate and conservative wings of the party that want to pull the measure in entirely different directions. The GOP controls the chamber 52-48, meaning he can lose no more than two Republicans and still pass it, given the united Democratic opposition.

With debt ceilings, spending plans, and tax reforms focusing all eyes on Washington, we thought it notable that for the first time in US history, the cost of interest on US government debt has risen above half a trillion dollars… One wonders, given the grandiose spending plans, if we will ever get back below half a trillion dollars?

Oil slid below $45 a barrel for the first time since OPEC agreed to cut output in November as U.S. shale confounds the producer group’s attempts to prop up prices. Futures have collapsed 11% this week, slumping to the lowest since Nov. 15 – two weeks before OPEC agreed to production curbs to boost prices and ease a global glut. The decline is being driven by expanding U.S. output that’s countering the group’s curbs. Energy companies in Asia slumped on Friday, after their American counterparts were hammered in the previous session. While news of OPEC’s cuts drove prices in early January to the highest since July 2015, that increase encouraged U.S. drillers to pump more.

The result has been 11 straight weeks of expansion in American production in the longest run of gains since 2012. Prices are still more than 50% below their peak in 2014, when surging shale output triggered crude’s biggest collapse in a generation and left rival producers such as Saudi Arabia scrambling to protect market share. “There’s disappointment that the production cuts we’ve seen from OPEC and others has not had any impact at this stage on global inventory levels,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The market seems to be much further away from a balanced situation than some had previously forecast. There is a possibility that oil could be headed to the low $40s range from here.”

Emerging-market companies are showing up to the U.S. debt market at the fastest pace ever, and finding plenty of appetite for their bonds. Sales of dollar-denominated notes have climbed to about $160 billion this year, more than double offerings at this point in 2016 and the fastest annual start on record, according to data compiled by Bloomberg going back to 1999. Emerging-market assets tanked after Donald Trump’s surprise election in November, but they’ve quickly recovered, with bonds returning 4% this year and outperforming U.S. investment-grade and high-yield debt. The deluge of issuance began when companies anticipating a surge in borrowing costs amid economic stimulus from Trump rushed to sell notes before his inauguration Jan. 20.

But the expected jump never materialized, extending the window for companies like Petroleo Brasileiro SA and Petroleos Mexicanos to pursue multi-billion-dollar deals. They found plenty of demand from investors keen to buy shorter-dated debt that’s better insulated against rising U.S. interest rates. Jean-Dominique Butikofer, the head of emerging markets for fixed income at Voya Investment Management in Atlanta, said he’s seen new interest in emerging markets from investors who already own U.S. high-yield bonds or emerging market sovereign debt that’s more vulnerable to rising interest rates. “You want to be less sensitive to U.S. rates, but you still want to diversify and you still want to play the EM catch-up growth story,” said Butikofer, whose firm manages $217 billion. “You’re going to gradually add emerging-market corporates.”

ChemChina has won more than enough support from Syngenta shareholders to clinch its $43 billion takeover of the Swiss pesticides and seeds group, the two companies said on Friday. The deal, announced in February 2016, was prompted by China’s desire to use Syngenta’s portfolio of top-tier chemicals and patent-protected seeds to improve domestic agricultural output. It is China’s biggest foreign takeover to date. It is one of several deals that are remaking the international market for agricultural chemicals, seeds and fertilisers. The other deals in the sector are a $130 billion proposed merger of Dow Chemical and DuPont, and Bayer’s plan to merge with Monsanto. The trend toward market consolidation has triggered fears among farmers that the pipeline for new herbicides and pesticides might slow.

Regulators have required some divestments as a condition for approving the Syngenta deal. Based on preliminary numbers, around 80.7% of Syngenta shares have been tendered, above the minimum threshold of 67% support, the partners said in a joint statement. [..] The transaction is set to close on May 18 after the start of an additional acceptance period for shareholders and payment of a special 5-franc dividend to holders of Swiss-listed shares on May 16. Holders of U.S.-listed depositor receipts will get the special dividend in July. Syngenta shares will be delisted from the Swiss bourse and its depository receipts from the New York Stock Exchange. Chief Executive Erik Fyrwald played down the transition from publicly listed group to becoming part of a Chinese state enterprise, stressing that Syngenta would remain a Swiss-based global company while under Chinese ownership.

The President of the EU’s ruling Council has intervened to calm Brexit tensions 24 hours after Theresa May launched a vicious attack on “Brussels bureaucrats” on the steps of No 10. Donald Tusk warned that talks would become “impossible” if emotions got out of hand between the UK and EU and called for “mutual respect” between the negotiating parties. The call for calm comes after Theresa May accused the EU’s bureaucracy of trying to influence the result of Britian’s general election by maliciously leaking the content of discussions to the media. In an aggressive speech on Wenesday she tore into officials, warning that her government would not let “the bureaucrats of Brussels run over us”.

The European Commission this morning reacted indignantly to Ms May’s conspiracy theory, with a spokesperson telling reporters that the organisation was “rather busy” and preoccupied with more important matters than trying to fix the poll. But Mr Tusk, a Polish national who represents the EU states’ heads of government in Brussels, said on Thursday afternoon: “Brexit talks [are] difficult enough. If emotions get out of hand, they’ll become impossible. Discretion, moderation and mutual respect needed. “At stake are the daily lives and interests of millions of people on both sides of the Channel.”

The call for calm contrasts with that of a Commission spokesperson earlier today, who said: “We are not naive, we know that there is an election taking place in the United Kingdom. People get excited whenever we have elections. “This election in the United Kingdom is mainly about Brexit. But we here in Brussels, we are very busy, rather busy, with our policy work. “We have too much to do on our plate. So, in a nutshell, we are very busy. And we will not Brexitise our work. “To put it in the words of an EU diplomat, the 30-minute slot that we are going to devote to Brexit per week, for this week it’s up.”

Alitalia will be put up for sale in two weeks having earlier this week fallen into administration. In a radio interview cited by the Financial Times, Carlo Calenda, the country’s economic development minister, said that the priority is for the whole company to get bought. “Within 15 days the commissioners will be open to expressions of interest,” he said. On Tuesday, Alitalia started bankruptcy proceedings for the second time in a decade after employees rejected job cuts and concessions linked to a €2bn recapitalisation plan. Shareholders voted unanimously to file for special administration. According to the Financial Times, the government of Prime Minister Paolo Gentiloni has extended a bridge loan of €600m to keep Alitalia afloat for the next six months, but has ruled out nationalisation.

This loan should give the commissioners appointed by the government time to come up with a strategy that will ensure the airline’s fleet is not grounded. Speaking to the broadcaster, Mr Calenda said the €600m loan would be the “maximum” of state aid on offer. Speaking about possible buyers, Mr Calenda said “any idea is welcome”. He stressed, however, that “Alitalia needs an alliance with a big European group”. Alitalia, whose major shareholders are Abu-Dhabi based Etihad Airways and Italian banks, has about 12,500 employees. It has been struggling ever since a previous bankruptcy in 2008.

Given its rich history, Italy is rightly attached to its relics. Unfortunately, this affection for the past does not stop at the Colosseum: It applies to failing companies too. Take Alitalia, Italy’s loss-making flag carrier, which has survived for years thanks to a string of public and private rescues. On Tuesday, the airline went into administration, prompting the government to provide a fresh loan worth €600 million ($655 million) to guarantee another six months of operation. Surely the time has come for Italy to stop losses. Unless Alitalia can find a buyer, the government should allow it to go bust. Politically, that is a tall order, of course. Politicians want to protect workers, who stand to lose their jobs if a company shuts down. But every euro used in a bailout is one that can’t be spent elsewhere; what economists call “opportunity cost.” How many more jobs could have been created had the government invested €600 million into upgrading Italy’s digital infrastructure?

Keeping Alitalia alive is also a burden on productivity, since it takes resources that might be deployed by more efficient competitors. Last year, a study for the European Commission found that the misallocation of workers and capital in Italy has steadily worsened since 1995, accounting for a large fraction of Italy’s productivity slowdown. If the government is serious about Italy returning to sustainable growth, it should stop helping losers get in the way of productive companies. There are also questions of financial stability. Between 1974 and 2014, Italian taxpayers have spent €7.4 billion propping up Alitalia, according to Mediobanca. Italy’s addiction to helping companies in trouble has contributed to its huge government debt, which now stands at nearly 133% of GDP, exposing Rome to the risk of a financial crisis.

The same problem also applies to banks. From UniCredit to Intesa Sanpaolo, many of Italy’s big lenders have granted hundreds of millions in credit lines to Alitalia, only to see their loans go up in smoke. The list also includes Monte Dei Paschi di Siena, the troubled bank which in December had to apply for a multi-billion euro government bailout. The reason? It was struggling under the weight of non-performing loans, like those it provided to Alitalia. While European rules on state aid will make it difficult for Rome to help Alitalia beyond the initial six months, one should never underestimate the ability of the Italian government to find a way to stitch together another flawed rescue. But if Italy is to finally start focusing on future growth, it will have to stop dwelling on the ruins of the past.

William Baumol — an economist who just died at the age of 95 — had a famous idea, commonly known as Baumol’s cost disease, that explains a lot about our modern world. It explains why barbers make more in San Francisco than in Cleveland and why services such as health care and education keep getting more expensive. And it provides a possible explanation for why rich countries like America are devoting more and more of their workforces to low-productivity services, dragging down the economy-wide rate of productivity growth. In the 1960s, Baumol was trying to understand the economics of the arts, and he noticed something surprising: Musicians weren’t getting any more productive — playing a piece written for a string quartet took four musicians the same amount of time in 1965 as it did in 1865 — yet musicians in 1965 made a lot more money than musicians in 1865.

The explanation wasn’t too hard to figure out. Rising worker productivity in other sectors of the economy, like manufacturing, was pushing up wages. An arts institution that insisted on paying musicians 1860s wages in a 1960s economy would find their musicians were constantly quitting to take other jobs. So arts institutions — at least those that could afford it — had to raise their wages in order to attract and retain the best musicians. The consequence is that rising productivity in the manufacturing sector of the economy inevitably pushes up the cost of labor-intensive services like live musical performances. Rising productivity allows factories to cut prices and raise wages at the same time. But when wages rise, music venues have no alternative but to raise ticket prices to cover the higher costs.

This became known as Baumol’s cost disease, and Baumol realized that it had implications far beyond the arts. It implies that in a world of rapid technological progress, we should expect the cost of manufactured goods — cars, smartphones, T-shirts, bananas, and so forth — to fall, while the cost of labor-intensive services — schooling, health care, child care, haircuts, fitness coaching, legal services, and so forth — to rise. And this is exactly what the data shows. Decade after decade, health care and education have gotten more expensive while the price of clothing, cars, furniture, toys, and other manufactured goods has gone down relative to the overall inflation rate — exactly the pattern Baumol predicted a half-century ago.

Baumol’s cost disease is a powerful tool for understanding the modern economic world. It suggests, for example, that the continually rising costs of education and health care isn’t necessarily a sign that anything has gone wrong with those sectors of the economy. At least until we invent robotic professors, teachers, doctors, and nurses, we should expect these low-productivity sectors of the economy to get more expensive. While some argue that prices keep rising because the government subsidizes health care through programs like Medicare and college educations through student loans and grants, you see the same basic pattern with services like summer camps, veterinary services, and Broadway shows that aren’t hamstrung by government regulations and subsidies.

Russia said it’s ready to send peacekeepers to Syria as it won backing from Turkey and Iran for a plan to establish safe zones inside the war-torn country in an effort to shore up a shaky cease-fire brokered by the three powers. The three countries signed a memorandum on the creation of so-called de-escalation areas on Thursday after two days of talks in Kazakhstan that also included representatives of the Syrian government and rebel groups. Opposition leaders distanced themselves from the plan, saying they can’t accept Iran as a guarantor of the truce and that they want “clear and tangible” guarantees the deal will be enforced. The U.S. also expressed doubts. “Russia is ready to send its observers” to help enforce the safe zones, President Vladimir Putin’s envoy to Syria, Alexander Lavrentiev, told reporters in the Kazakh capital, Astana. “We believe the Syrian crisis can only be resolved through political methods.”

Putin said on Wednesday that he’d secured the backing of U.S. President Donald Trump for the proposal, which could include a ban on bombing raids. But State Department spokeswoman Heather Nauert said Thursday that the U.S. has “concerns” about the accord, “including the involvement of Iran as a so-called “guarantor,”’ and said Russia should do more to stop violence. [..] The latest initiative would establish four zones patrolled by foreign forces – possibly including Russian ones – in the northwestern Idlib province, Homs province in the west, the East Ghouta suburb of the capital Damascus and southern Syria. It will take a month to finalize the maps of the proposed safe zones, Iranian Deputy Foreign Minister Hossein Jaberi Ansari said. The United Nations’ Special Envoy for Syria, Staffan de Mistura, who also attended the Astana talks, described the agreement as a “step in the right direction.”

The safe zones which are being created in Syria will be closed for warplanes of the United States and those of the U.S.-led coalition, Russian news agencies quoted Russian envoy at Syria peace talks Alexander Lavrentyev as saying on Friday. Turkey and Iran agreed on Thursday to Russia’s proposal for “de-escalation zones” in Syria, a move welcomed by the United Nations but met with scepticism from the United States.

The European Union wants China to help prevent migrants and refugees using Chinese-made inflatable boats to get into the bloc by stopping the boats reaching them, the European Commissioner for Migration said on Thursday. Dimitris Avramopoulos, speaking to reporters in Beijing after meeting Chinese Minister for Public Security Guo Shengkun, said the rubber boats used by people smugglers were made in China. “The rubber boats used by the smuggler networks in the Mediterranean are fabricated somewhere in China, they are exported to the countries in Asia and they are used by them,” Avramopoulos said.

“So I requested the support and cooperation from the Chinese authorities in order to track down this business and dismantle it, because what they produce is not serving the common good of the country. It is a very dangerous tool in the hands of ruthless smugglers.” He gave no further details, but said he and Guo had not discussed the possibility of China taking any of the refugees or migrants. More than a million people sought asylum in Europe’s rich north in 2015, mostly in Germany but also in large numbers in Sweden, straining the capacity of countries to cope. A contentious deal with Turkey to stop Syrian refugees from reaching Greece and the overland route to Germany, in return for EU funds, has reduced flows to a trickle, though thousands of migrants still try to reach Europe from Libya via sea routes.

Merkel has promised that the refugee crisis seen two years ago will not be repeated: Never again will Europe see an uncontrolled inflow of millions of people. The refugee deal with Turkey is working, we are repeatedly told, and the crisis is over. That, though, could turn out to be wrong. With German voters set to go to the polls on Sept. 24, Merkel’s re-election campaign hinges on there not being a repeat of the refugee crisis, even if it’s not as substantial as the 2015 influx. But west of the closed Balkan route, a new migrant stream has been growing since the beginning of the year. From Jan. 1 to April 23, 36,851 migrants have followed the central Mediterranean route from North Africa to Italy. That represents a 45% increase over the same period last year, when a record 181,000 people crossed the Mediterranean on the route.

Even more concerning is the fact that summer hasn’t even begun. Experience has shown that most migrants only climb into the boats once the Mediterranean grows calmer. Italian authorities estimate that a quarter million people will arrive on its shores this year. “There are challenges ahead,” says a senior German security official. Berlin is particularly concerned because it’s not just Africans who are taking the Mediterranean route to Italy. An increasing number of South Asians are as well, which could mean that the route across the sea to Italy is now seen as a viable alternative to the defunct Balkan route. People from Bangladesh now represent the second largest group of migrants that have crossed over from Libya this year. From January to March 2016, by contrast, exactly one Bangladeshi was picked up on the route. Pakistanis have also chosen the Mediterranean route more often in recent months.

[..] The EU is currently working on an emergency plan in case a “serious crisis situation” develops. The discussions are focusing on a scenario under which more than 200,000 refugees would have to be redistributed each year. An unpublished report by Malta, which currently holds the rotating European Council presidency, calls for a more restrictive interpretation of asylum rights in such a case. In other words, should too many migrants begin arriving, the EU will increase efforts at deterrence. Controversial proposals for reception camps to be established in North Africa also remain under discussion. Most of those currently fleeing from countries like Nigeria, Guinea and the Ivory Coast are doing so to escape grinding poverty and in the hopes of finding better opportunities in Europe. Very few of them have much chance of being granted asylum. That reality has made redistribution within the EU even more difficult. According to current law, those with no chance at asylum are supposed to be sent back home as quickly as possible and not sent to other European countries.

Tensions are rising on the eastern Aegean island of Chios, which is currently favored by human smugglers ferrying migrants over from neighboring Turkey, with an increasing number of brawls at overcrowded state reception centers and local residents’ tolerance wearing thin. Clashes between migrants of different ethnicities are an almost daily occurrence, residents said following a violent confrontation on Tuesday night between Afghan and Algerian nationals at the Vial reception facility. That incident started as a fight between two small groups throwing stones at each other and escalated into a full-blown brawl involving around 60 people. Riot police stationed nearby were eventually obliged to enter the facility and break up the fight.

According to sources at the Citizens’ Protection Ministry, migrants have been arriving in greater numbers on Chios as it still lacks a so-called pre-departure camp due to protests by local residents against the creation of new facilities on the island. As a result, migrants landing on Chios and deemed ineligible for asylum are not being deported to Turkey as foreseen in an agreement signed between Turkey and the EU in March last year. Around 200 migrants have arrived on Chios this week, according to government figures, compared to virtually none on other islands in the eastern Aegean. And, according to a top-ranking police official, the problem is unlikely to be resolved until a center is set up. “The message being sent to those deciding to make the journey is that if you get to Chios they won’t send you back,” he said.

The Greek government is giving cash incentives for rejected asylum seekers on the islands to forgo their legal rights to appeal their cases. Some €1,000 and free plane tickets home are now part of a largely EU-financed package to send them packing as quickly as possible. “This is quite complicated and quite immoral,” a Greek lawyer working for Save the Children, an international NGO, told EUobserver on Tuesday (2 May). The move is part of a larger effort to return people to Turkey and free up administrative bottlenecks, but the plan has generated criticism from human rights defenders who say asylum seekers are being pushed into taking the money. People have five days to decide whether to take the cash, with reports emerging that even that short delay was not being respected by authorities. Previously, people were entitled to the assistance even if they appealed.

The scheme only applies to those in so-called eu hotspots on the Chios, Kos, Leros, Lesvos, and Samos islands, where arrivals are screened, given that Turkey does not accept people back from mainland Greece. Greek minister of migration Ioannis Mouzalas has said the financial bait was needed to prevent bogus claimants from abusing the asylum system. The new rules on excluding people who appeal their cases, imposed last month, also come after the European Commission pressured Athens into shortening its appeal process and removing administrative barriers to send more people home. The EU-Turkey deal last year was supposed to ensure that new asylum arrivals whose applications have been declared unfounded would be returned to the country. But only around 1,500 have been sent back since its launch, with the Greek appeals system consistently ruling in favour of initially rejected asylum seekers over broader concerns that Turkey was not safe.

[..] The whole appears to be part of bigger plan to squeeze asylum-seeker rights on the islands and get them out of Greece as fast as possible. It also comes on the heels of a new plan that aims to boot NGOs from the islands. “Many NGOs will longer be on the islands after July, it means there is going to be a lot less scrutiny and a lot less visibility on what is going on as well,” said Claire Whelan from the Norwegian Refugee Council, an independent humanitarian organisation. NGOs working in the medical field in the Vial hotspot in Chios island have already been replaced by the Greek army and the Greek Red Cross. All were informed earlier this year that DG ECHO, the EU Commission’s humanitarian branch, would no longer fund them. Instead, the money will be coming from the Commission’s interior and security department, DG Home. “One of the biggest gaps we see, that remains, is access to legal assistance and legal counseling. And I don’t know if that will be funded under DG Home and the government,” the Norwegian Refugee Council’s Whelan said.

Prime Minister Alexis Tsipras called on Greece’s international lenders on Thursday to reach an agreement on easing its debt burden by May 22, when eurozone finance ministers meet in Brussels to discuss the country’s bailout progress. Athens and its creditors reached a long-awaited deal at staff-level this week on a series of bailout reforms Greece needs to unlock loans from its €86 billion rescue package, the country’s third since 2010. The EU and the IMF, which has yet to announce if it will participate in the bailout, have now started negotiations over Greece’s post-bailout fiscal targets, a key element for granting it further debt relief. Greece is being firm that it has done what was asked of it and now wants to see movement from the other side. “Medium-term debt relief measures must be clearly defined by the May 22 Eurogroup meeting,” Tsipras told his cabinet on Thursday.

“Greece has done its part and all parties must now fulfill their commitments.” The creditors have been not been quite as upbeat and there is no guarantee that the May 22 meeting will actually sign off on the new tranche of loans, let alone draft up debt relief. But Luxembourg Finance Minister Pierre Gramenga did cite progress when speaking to reporters on the sidelines of a conference in Luxembourg. “We’re one step closer. They [Greece] over-performed last year, they are on track this year, we have now an agreement looming that we will hopefully agree on in Eurogroup,” he said. “Those who have been pessimistic all the time have been proved wrong. I’m very pleased about that. The worst case is not always the scenario that plays out.” Greece’s economy and budget have improved markedly recently, although major problems of poverty and unemployment persist.

At least 23 cuts have been inflicted on pensioners since 2010, with losses adding up to more than €50 billion. For some, their benefits have fallen by as much as 50%. The United Pensioners network has just added a 23rd cut to its list – the reduction of up to 18% of main and supplementary pensions agreed by the government this week. Network chief Nikos Hatzopoulos says the cuts have impoverished pensioners. The other 22 cuts on the list are as follows:

– In 2010, Christmas, Easter and holiday bonuses ended.

– In 2011, all pensioners under the age of 60 took a 6-10% cut.

– In the same year, pensioners were also slapped with a solidarity levy ranging from 3 to 13% for monthly pensions over €1,400. Also cuts to supplementary pensions started, from 3 to 10%.

– Main pensions to under-60s were slashed in 2011 and supplementary pensions of more than 150 euros a month fell by 15-30%.

– From January 2012, there were fresh cuts to any “high” pensions not affected until then.

– In 2012, monthly pensions over 1,000 euros were hit with a new cut.

– Summer 2014 saw a 5.2% cut to all supplementary pensions.

– In 2015, minimum pensions fell.

– In the same year, all early retirements incurred a 10% cut.

– From last May, all new pensioners were informed they would get up to 30% less.

The euro briefly surged to a five-month high against a basket of currencies after centrist candidate Emmanuel Macron won the first round of a hotly contested French election vote, an outcome broadly considered the most market-friendly. Immediately after the vote on Sunday, the euro surged to $1.0940, its highest level against the dollar since November last year, before retreating to around $1.0869. It rose against the pound and the Swiss franc too and stocks across Europe and Asia climbed as investors pulled out of assets considered safest to hold during times of economic uncertainty or political turmoil, like gold, Japan’s yen and core government bonds. The FTSE 100 was up 1.5% in early trading while Paris’ CAC 40 added almost 4%. Germany’s DAX rose more than 2%.

Analysts and strategists were quick to point out that the outcome lessens the risk of an anti-establishment shock, like the UK’s vote last year to quit the European Union and Donald Trump’s US presidential election victory in November. “Macron will be reassuring to markets, with his pledge to lower corporate taxes and to lighten the administrative burden on firms. He basically represents continuity,” said Octavio Marenzi, CEO of Opimas, a capital markets management consultancy. “While the markets would have preferred Trump-style deregulation, no candidate, including Macron, would dare touch such an agenda in France,” he added.

The fight over Obamacare’s future is now threatening to shut down the federal government. Congress must pass a spending bill by the end of this week or the federal government will run out of money. And Democrats, whose votes are needed to approve a budget, plan to use their leverage to force Republicans to stabilize Obamacare. They want the budget deal to fund a set of Obamacare subsidies that are crucial to keeping insurers in the program. Here’s how Obamacare figures into the government spending battle. Subsidies make health care affordable for those with low-incomes: The House GOP bill to repeal and replace Obamacare may be shelved for now, but Republicans still hold tremendous power over Obamacare’s future.

The most pressing issue is the funding of subsidy payments to insurers known as cost-sharing reductions, or CSRs. These make health care more affordable for lower-income Obamacare enrollees by reducing their deductibles and co-pays. Those with incomes under $29,700 for a single person are eligible. The payments can cut deductibles to as low as $227, on average, instead of nearly $3,500 for the standard silver Obamacare plan. These subsidies are important to insurers, too. A little over 7 million people, or 58%, signed up for policies with cost-sharing subsidies on the Obamacare exchanges for 2017. The payments are made directly to insurers and will cost the federal government an estimated $7 billion this year.

Republicans sued Obama to block the subsidies: The subsides have been at the center of a court battle since 2014, when House Republicans sued the Obama administration to try to stop them. GOP lawmakers have argued that Congress never appropriated funds for the payments. A district court judge agreed last year, ruling the subsidies were illegal. The Obama administration filed an appeal, and the subsidies continue to be paid while GOP lawmakers and Trump officials agree on a settlement.

Looming above Washington as Congress and the White House attempt to avert a funding shutdown in only five days’ time, Donald Trump’s central campaign promise to build a wall on the Mexican border threatens to bring the US government to a halt this week in a national display of dysfunction. On Sunday, even White House officials expressed uncertainty about whether the president would sign a funding bill that did not include money for a wall, which Trump has promised since the first day of his presidential campaign. “We don’t know yet,” said the White House budget director, Mick Mulvaney, on Fox News Sunday. “We are asking for our priorities.” The president himself waded into the negotiations on Sunday, holding out two sticks and no carrot. “ObamaCare is in serious trouble,” he tweeted. “The Dems need big money to keep it going – otherwise it dies far sooner than anyone would have thought.”

“The Democrats don’t want money from budget going to border wall despite the fact that it will stop drugs and very bad MS 13 gang members,” he continued, suggesting he would accuse Democrats of being soft on international crime. But Trump also retreated from a related pledge to the American people: that he would “make Mexico pay” for the wall, which is estimated to cost billions. “Eventually, but at a later date so we can get started early, Mexico will be paying, in some form, for the badly needed border wall,” the president tweeted, without offering a plan or timeline. Without a deal, funding for the government will run out at midnight on 28 April, Trump’s 100th day in office. The secretary of homeland security, John Kelly, told CNN’s State of the Union on Sunday he suspected the president would push for the wall. “He’ll do the right thing, for sure, but I suspect he’ll be insistent about the funding,” Kelly said.

“..the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration – check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.”

You’ve probably heard the news that the celebrated post-WW II beating heart of America known as the middle class has gone from “burdened,” to “squeezed” to “dying.” But you might have heard less about what exactly is emerging in its place. In a new book, The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Peter Temin, Professor Emeritus of Economics at MIT, draws a portrait of the new reality in a way that is frighteningly, indelibly clear: America is not one country anymore. It is becoming two, each with vastly different resources, expectations, and fates. In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth).

These are the 20% of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success. They grow up with parents who read books to them, tutors to help with homework, and plenty of stimulating things to do and places to go. They travel in planes and drive new cars. The citizens of this country see economic growth all around them and exciting possibilities for the future. They make plans, influence policies, and count themselves as lucky to be Americans. The FTE citizens rarely visit the country where the other 80% of Americans live: the low-wage sector. Here, the world of possibility is shrinking, often dramatically. People are burdened with debt and anxious about their insecure jobs if they have a job at all. Many of them are getting sicker and dying younger than they used to.

They get around by crumbling public transport and cars they have trouble paying for. Family life is uncertain here; people often don’t partner for the long-term even when they have children. If they go to college, they finance it by going heavily into debt. They are not thinking about the future; they are focused on surviving the present. The world in which they reside is very different from the one they were taught to believe in. While members of the first country act, these people are acted upon. The two sectors, notes Temin, have entirely distinct financial systems, residential situations, and educational opportunities. Quite different things happen when they get sick, or when they interact with the law. They move independently of each other. Only one path exists by which the citizens of the low-wage country can enter the affluent one, and that path is fraught with obstacles. Most have no way out.

The richest large economy in the world, says Temin, is coming to have an economic and political structure more like a developing nation. We have entered a phase of regression, and one of the easiest ways to see it is in our infrastructure: our roads and bridges look more like those in Thailand or Venezuela than the Netherlands or Japan. But it goes far deeper than that, which is why Temin uses a famous economic model created to understand developing nations to describe how far inequality has progressed in the United States. The model is the work of West Indian economist W. Arthur Lewis, the only person of African descent to win a Nobel Prize in economics. For the first time, this model is applied with systematic precision to the U.S.

The result is profoundly disturbing. In the Lewis model of a dual economy, much of the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration – check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.

Who needs internal walls or a fitted kitchen anyway? As house prices soar ever further out of reach, London’s mayor, Sadiq Khan, is to subsidise a new generation of ultra-basic “naked” homes wthat will sell for up to 40% less than standard new builds. The apartments will have no partition walls, no flooring and wall finishes, only basic plumbing and absolutely no decoration. The only recognisable part of a kitchen will be a sink. The upside of this spartan approach is a price tag of between £150,000 and £340,000, in reach for buyers on average incomes in a city where the average home now costs £580,000.

The no-frills concept is to be be tested with 22 apartments on three sites in Enfield, north London, where the council will allow builders to take over derelict council estate garages and car parks. Khan has awarded a £500,000 grant to what he says will be the largest custom-build development in London. If successful, a further seven sites will be built. “The idea is to strip out all of the stuff that people don’t want in the first place,” said Simon Chouffot, one of the founders of the not-for-profit developer, Naked House. “People want to do some of the custom building. We can make it affordable by people doing some of the work themselves.” The developers are a group of thirtysomethings who found themselves priced out of buying homes in London’s fast-rising property market.

“We are all from generation rent and we have been growing up with this housing crisis,” said Chouffot, 37. “I put down roots in north-east London but it was impossible to buy there. My response has been to live on a boat on the Regent’s canal. The average income in our area is about £40,000 but the average income you need to buy a property is £170,000, so there is a huge affordability gap.” He said the Enfield homes would be about 15% cheaper to build than standard new homes because of their basic design.

China stocks tumbled more than 1% on Monday and looked set for their biggest loss of the year amid signs that Beijing would tolerate more market volatility as regulators clamp down on shadow banking and speculative trading. Recent signs of stability in China’s economy “have provided a good external environment and a window of opportunity to reduce leverage in the financial system, strengthen supervision and ward off risks,” the official Xinhua News Agency reported on Sunday. “Over the past week, interbank rates trended higher, bond and capital markets suffered from sustained corrections and some institutions faced liquidity pressure. But these have little impact to the stability of the broader environment.”

The Shanghai Composite Index slumped 1.6% to 3,123.80 points by the lunch break, after posting its biggest weekly loss so far this year last week. The blue-chip CSI300 index fell 1.3% to 3,423.11. Barring a rebound, the indexes looked set for their biggest one-day percentage loss since mid-December. Daily declines of more than 1% in the indexes have been rare for notoriously volatile Chinese markets this year. “Even the better-than-expected Q1 data could not boost the market, as investors are concerned about regulatory risks,” wrote Larry Hu, analyst at Macquarie Capital Ltd, referring to stronger-than-expected 6.9% economic growth early in the year.

In the latest of a flurry of regulatory measures, China’s insurance regulator said on Sunday it will ramp up its supervision of insurance companies to make sure they comply with tighter risk controls and threatened to investigate executives who flout rules aimed at rooting out risk-taking. The banking regulator said late on Friday that growth in Chinese wealth management products (WMPs) and interbank liabilities eased in the first quarter, suggesting authorities are making some headway in containing financial risks built up by years of debt-fuelled stimulus.

ZHENGZHOU, China — Here in China’s heartland, in the capital of its Henan province, some of the country’s most powerful leaders are meeting. But these are not the political elite that have run the country for decades, this is a new crop of leaders — all from the private sector. This city, near corn and wheat fields, is hosting an annual meeting from the China Entrepreneur Club. That’s an invite-only group composed of 55 Chinese billionaires, at last count. In other words, they’re the richest — and among the most influential — people in a country that’s already minting millionaires monthly. Unlike many of the moneyed elite from other developing countries, who accrued wealth from a privatization land-grab, almost all of China’s entrepreneurs started from scratch. And these entrepreneurs aren’t just titans of industry, but also technology, energy, finance and retail.

In many ways, they are China’s new economy. How they’ve succeeded, mostly despite the Communist government, is a major and under-appreciated part of the story of China’s transformation over the past 35 years. In fact, even before the Chinese government officially acknowledged the benefits of private companies, hundreds of thousands of businesses had already begun. A handful of those have become international giants. Huawei is now one of the largest telecommunications equipment makers in the world, but it started by importing used gear from the telephone exchange in Hong Kong. The company now known as Lenovo, the world’s top PC-maker by market share, started by selling televisions imported into China. Geely, now one of China’s biggest carmakers, started by selling parts for refrigerators.

The people behind those names are China’s first generation of entrepreneurs. The second generation came about in the 1990s, and the country’s third crop of entrepreneurs includes people like Alibaba’s Jack Ma, and Tencent’s Pony Ma (no relation), who are now the focus of most of the Western world’s attention. And China is already churning out a new slew of tech titans in the making. By some measures, China’s private sector now accounts for two thirds of its economy. Entrepreneurs, not politicians, are now the ones driving the long-sought economic rebalancing away from a dependence on manufacturing and exports and more toward services and consumption.

But one of the major questions about China’s future is what the dynamic will be like between entrepreneurs and state-owned enterprises. So far, Beijing has largely treated private success benignly because the biggest stars, like Alibaba, are more valuable to the national cause without official direction or interference. Those companies are flying China’s flag, in an increasingly international capacity, more effectively than any state campaign or directive could ever hope to achieve. But the state and its companies still comprise a full third of China’s economy, and when state-owned enterprises begin to get crowded out, there will likely be tension.

Alibaba Chairman Jack Ma said society should prepare for decades of pain as the internet disrupts the economy. The world must change education systems and establish how to work with robots to help soften the blow caused by automation and the internet economy, Ma said in a speech to an entrepreneurship conference in Zhengzhou, China. “In the next 30 years, the world will see much more pain than happiness,” Ma said of job disruptions caused by the internet. “Social conflicts in the next three decades will have an impact on all sorts of industries and walks of life.” It was an unusual speech for the Alibaba co-founder, who tends to embrace his role as visionary and extol the promise of the future. He explained at the event that he had tried to warn people in the early days of e-commerce it would disrupt traditional retailers and the like, but few listened.

This time, he wants to warn against the impact of new technologies so no one will be surprised. “Fifteen years ago I gave speeches 200 or 300 times reminding everyone the Internet will impact all industries, but people didn’t listen because I was a nobody,” he said. Ma made the comments as Alibaba, China’s largest e-commerce operator, spends billions of dollars to move into new businesses from film production and video streaming to finance and cloud computing. The Hangzhou-based company, considered a barometer of Chinese consumer sentiment, is looking to expand abroad since buying control of Lazada to establish a foothold in Southeast Asia, potentially setting up a clash with the likes of Amazon.com. Ma, 52, was also critical of the traditional banking industry, saying that lending must be available to more members of society. The lack of a robust credit system drives up the costs for everyone, he said.

[..] Ma was at times brutal in his criticism of companies that won’t adapt. At one point, he said cloud computing and artificial intelligence are essential for business – and if leaders don’t get that, they should find young people in their companies to explain it to them. Another time, he called for traditional industries to stop complaining about the internet’s effects on the economy. He said Alibaba critics ignore that Taobao, its main online marketplace, has created millions of jobs. [..] He also warned that longer lifespans and better artificial intelligence were likely to lead to both aging labor forces and fewer jobs. “Machines should only do what humans cannot,” he said. “Only in this way can we have the opportunities to keep machines as working partners with humans, rather than as replacements.”

When i published “The Shock Doctrine” a decade ago, a few people told me that it was missing a key chapter in the evolution of the tactic I was reporting on. That tactic involved using periods of crisis to impose a radical pro-corporate agenda. They said that in the United States that story doesn’t start with Reagan in the 1980s, as I had told it, but rather in New York City in the mid-1970s. That’s when the city’s very near brush with all-out bankruptcy was used to dramatically remake the metropolis. Massive and brutal austerity, sweetheart deals for the rich, privatizations. In classic Shock Doctrine style, under cover of crisis, New York changed from being a place with some of the most generous public services in the country, engaged in some cutting-edge attempts at racial and economic integration, to the temple of nonstop commerce and gentrification that we all know and still love today.

New York’s debt crisis is an incredibly important and little understood chapter in the evolution of what Nobel Prize-winning economist Joseph Stiglitz calls market fundamentalism, a process the Trump administration is in the process of rapidly accelerating, which is why I was so happy to receive Kim Phillips-Fein’s remarkable new book, “Fear City.” In it, she meticulously documents how the remaking of New York City in the ’70s was a prelude to what would become a global ideological tidal wave, one that has left the world brutally divided between the 1% and the rest. She helps us to understand many of the forces that Trump exploited to win the White House, from economic insecurity to crumbling public infrastructure to fearmongering about black crime, all amid previously unimaginable private wealth.

The IMF had a sobering message for Greece this weekend: Even if the country secures debt relief from its European creditors—a question that is by no means assured with bailout talks still deadlocked—the nation still needs even more painful economic overhauls than currently planned. Seven years into an economic crisis and another near-term financial emergency looming, that is a message no Greek wants to hear and a key reason why the IMF is also urging Germany and Athens’ other European creditors to give the country hope in the form of real debt relief. The country’s “fiscal and structural reforms…pension reforms, tax reforms, are only a down payment,” said Poul Thomsen, IMF’s European department chief and Greece’s original bailout architect, on the sidelines of the fund’s semiannual meeting of finance ministers and central bankers.

To bring the country’s unemployment and income levels back to precrisis rates will take “deep structural reforms, many of which are not yet on the books,” he said. The jobless rate is currently at 22% and half of all the youth labor force are without work. “This is a long-term project,” he said. Mr. Thomsen, along with IMF Managing Director Christine Lagarde, met with Finance Minister Euclid Tsakalotos over the weekend ahead of a return of the fund to Athens next week. Although bailout talks continue, the fund hasn’t been involved in emergency financing for the country in three years, and future funding from the IMF is an open question. Fund officials worry the Greece’s existing efforts are stretching the nation’s political and social limits to their breaking point.

The country has already endured a series of political crises and government changeovers over the bailout years. Another could be coming, analysts say, as the government faces debt due in the coming months that it can’t cover without additional help from outside creditors. Earlier this year, the fund said the deadlock over new bailout terms, financing and debt relief risked pushing the country out of the eurozone. Analysts say Greece’s crisis could be the thread that unravels the currency union, especially amid Britain’s rejection of the European Union and rising anti-euro parties in key upcoming elections.

The country’s four systemic banks have evolved into some of the biggest property owners in Greece, obtaining ownership of assets worth over €40 billion in the past few years. The majority are properties that came under the banks’ full ownership mainly from being the collateral used by borrowers – households and enterprises – who failed to repay their debts. There also are properties used to house bank branches that were shut down, assets belonging to banks’ subsidiaries of banks, etc. According to bank officials, the acquisition of these properties has met all the legal requirements and they do not include assets stemming from nonperforming loans created during the years of crisis, originating, instead, from previous years.

Banks are examining various ways to sell them off – including the use of an online platform for investors – so as to be rid of the heavy maintenance costs, to capitalize on the assets and to obtain liquidity that can then be channeled into the economy through loans. Certain lenders are at an advanced stage in the creation of such a platform, aiming to launch the first auctions some time in June. It is estimated that if banks manage to attract foreign investors this could revitalize the Greek property market, which has contracted dramatically in recent years due to the prolonged recession. From 250,000 transactions in 2007, the market dropped to just 20,000 in 2014. Banks have already engaged in certain transactions, selling some small or large properties (such as hotels) to foreign investors.

However, more extensive activity,requires other procedures, which would also be simple and transparent. Electronic auctions appear as the best way forward, as they are open, do not require the seller’s physical presence and have low costs, while also keeping out the “vultures” that take advantage of the lack of transparency in conventional auctions. The online platforms will include all the main details of each asset, while potential buyers will be allowed to visit the properties on offer and submit their offers online on certain dates. Bank officials tell Kathimerini that one such platform in the US has sold over 200,000 properties worth $34 million to investors from more than 100 countries in the last decade.

The last time Robert Shiller heard stock-market investors talk like this in 2000, it didn’t end well for the bulls. Back then, the Nobel Prize-winning economist says, traders were captivated by a “new era story” of technological transformation: The Internet had re-defined American business and made traditional gauges of equity-market value obsolete. Today, the game changer everyone’s buzzing about is political: Donald Trump and his bold plans to slash regulations, cut taxes and turbocharge economic growth with a trillion-dollar infrastructure boom. “They’re both revolutionary eras,” says Shiller, who’s famous for his warnings about the dot-com mania and housing-market excesses that led to the global financial crisis. “This time a ‘Great Leader’ has appeared. The idea is, everything is different.”

For Shiller, the power of a new-era narrative helps answer one of the most hotly debated questions on Wall Street as stocks set one high after another this year: Why are traders so fixated on the upsides of a Trump presidency when the downside risks seem just as big? For all his pro-business promises, the former reality TV star’s confrontational foreign policy and haphazard management style have bred uncertainty – the one thing investors are supposed to hate most. Charts illustrating the conundrum have been making the rounds on trading floors. One, called “the most worrying chart we know” by SocGen at the end of last year, shows a surging index of global economic policy uncertainty severing its historical link with credit spreads, which have declined in recent months along with other measures of investor fear. The VIX index, a popular gauge of anxiety in the U.S. stock market, has dropped more than 30 percent since Trump’s election.

[..] For Hersh Shefrin, a finance professor at Santa Clara University and author of a 2007 book on the role of psychology in markets, the rally is just another example of investors’ remarkable penchant for tunnel vision. Shefrin has a favorite analogy to illustrate his point: the great tulip-mania of 17th century Holland. Even the most casual students of financial history are familiar with the frenzy, during which a rare tulip bulb was worth enough money to buy a mansion. What often gets overlooked, though, is that the mania happened during an outbreak of bubonic plague. “People were dying left and right,” Shefrin says. “So here you have financial markets sending signals completely at odds with the social mood of the time, with the degree of fear at the time.”

Shiller says when markets are as buoyant as they are now, resisting the urge to pile in is hard regardless of what else might be happening in society. “I was tempted to do it, too,” he says. “Trump keeps talking about a new spirit for America and so you could (A) believe that or (B) you could believe that other investors believe that.” On whether stocks are nearing a top, Shiller can’t say with any certainty. He’s loathe to make short-term forecasts. Despite the well-timed publication of his book “Irrational Exuberance” just as the dot-com bubble peaked in early 2000, the Yale University economist had warned (with caveats) that shares might be overvalued as early as 1996. Investors who bought and held an S&P 500 fund in the middle of that year made about 8 percent annually over the next decade, while those who invested at the start of 2000 lost money. The index sank 49 percent from its high in March 2000 through a bottom in October 2002.

This is the most dangerous and overvalued stock market on record — worse than 2007, worse than 2000, even worse than 1929. Or so warns Wall Street soothsayer John Hussman in his scariest jeremiad yet. “Presently, we observe the broadest market valuation extreme in history,” writes the chairman of the cautious Hussman Funds investment group, “with the steepest median valuations on record, and the most reliable capitalization-weighted measures within a few percent of their 2000 peaks.” On top of such warning signs as “extreme valuations, bullish sentiment, and consumer confidence,” he adds, “market action has deteriorated in interest-sensitive sectors… As of Friday, more than one-third of stocks are already below their 200-day moving averages.” Don’t be fooled by the booming headline indexes.

More NYSE stocks hit new 52-week lows last week than new 52-week highs, he notes. In a nutshell: Run. OK, so, it is always easy to criticize. Husssman, a professional economist and well-known Wall Street figure, has been here before. He’s been warning about stock-market valuations for several years. He’s in that camp that the permabulls, wrongly, call “permabears.” He’s been wrong — or, perhaps, just very early — many times. But he was, notably, also correct and prescient about both the 2000 and 2008 crashes before they happened, when few others were. Opinions, of course, are free. But facts are sacred. And more than a few are suggesting caution. According to the World Bank, the total U.S. stock market is now valued at more than 150% of annual GDP. That is way above historic norms, and about the same as it was at the market extreme of 2000.

Wall Street speculators are zeroing in on the next U.S. credit crisis: the mall. It’s no secret many mall complexes have been struggling for years as Americans do more of their shopping online. But now, they’re catching the eye of hedge-fund types who think some may soon buckle under their debts, much the way many homeowners did nearly a decade ago. Like the run-up to the housing debacle, a small but growing group of firms are positioning to profit from a collapse that could spur a wave of defaults. Their target: securities backed not by subprime mortgages, but by loans taken out by beleaguered mall and shopping center operators. With bad news piling up for anchor chains like Macy’s and J.C. Penney, bearish bets against commercial mortgage-backed securities are growing.

In recent weeks, firms such as Alder Hill Management – an outfit started by protégés of hedge-fund billionaire David Tepper – have ramped up wagers against the bonds, which have held up far better than the shares of beaten-down retailers. By one measure, short positions on two of the riskiest slices of CMBS surged to $5.3 billion last month – a 50% jump from a year ago. “Loss severities on mall loans have been meaningfully higher than other areas,” said Michael Yannell at Gapstow Capital, which invests in hedge funds that specialize in structured credit. Nobody is suggesting there’s a bubble brewing in retail-backed mortgages that is anywhere as big as subprime home loans, or that the scope of the potential fallout is comparable.

After all, the bearish bets are just a tiny fraction of the $365 billion CMBS market. And there’s also no guarantee the positions, which can be costly to maintain, will pay off any time soon. Many malls may continue to limp along, earning just enough from tenants to pay their loans. But more and more, bears are convinced the inevitable death of retail will lead to big losses as defaults start piling up. The trade itself is similar to those that Michael Burry and Steve Eisman made against the housing market before the financial crisis, made famous by the book and movie “The Big Short.” Often called credit protection, buyers of the contracts are paid for CMBS losses that occur when malls and shopping centers fall behind on their loans. In return, they pay monthly premiums to the seller (usually a bank) as long as they hold the position. This year, traders bought a net $985 million contracts that target the two riskiest types of CMBS. That’s more than five times the purchases in the prior three months.

The Federal Reserve, which has struggled to stoke inflation since the financial crisis and up until now raised rates less frequently than it and markets expected, may be about to hit the accelerator on rate hikes. On Wednesday, the U.S. central bank is almost universally expected to raise its benchmark interest rates, a move that just a few weeks ago was viewed by the markets as unlikely. And with inflation showing signs of perking up, Fed policymakers may signal there could be more than the three rate rises they have forecast for this year. “They do not have as much room to be patient as they did before,” said Tim Duy, an economics professor at the University of Oregon, who expects Fed policymakers to lift their rate forecasts this week.

Policymakers have their eyes on achieving full employment and 2-percent inflation. The faster the economy approaches those goals, Duy said, the quicker the Fed will want to tighten policy to avoid getting behind the curve. “That’s an acceleration in the dots,” he said, referring to forecasts published by the Fed that show policymakers’ individual rate-hike forecasts as dots on a chart. The economy already appears closer to its goals than the Fed had expected in December, the last time it released forecasts. The jobless rate, at 4.7%, is below what policymakers see as the long-run norm, and inflation, at 1.7%, is already in the range they had expected by year end. As Fed policymakers prepare to raise rates this week for the second time in three months, the inflation terrain they face looks steeper than it has been since the financial crisis when one of the central bank’s policy aims was to generate inflation.

There are signs of more inflation globally, the dollar is pushing down less on U.S. prices, domestic inflation expectations have picked up and Friday’s closely watched monthly jobs report showed wages rising 2.8% year-on-year in February, with payrolls rising a sturdy 235,000. The Fed’s preferred inflation measure, the so-called core PCE price index, recorded its biggest monthly increase in five years in January and was up 1.7% year-on-year after a similar gain in December. Most Fed policymakers say such data gives them increasing confidence that inflation will eventually reach the Fed’s goal after years of undershooting.

As of October 24, the U.S. Treasury was flush with $435 billion of cash. That was because the department’s bureaucrats had been issuing debt hand-over-fist and piling up a cash hoard, apparently, for the period after March 15, 2017 when President Hillary Clinton would need to coax another debt ceiling increase out of Congress. Needless to say, Hillary was unexpectedly (and thankfully) retired to Chappaqua, New York. But the less discussed surprise is that the U.S. Treasury’s cash hoard has virtually disappeared in the run-up to the March 15 expiration of the debt ceiling holiday. That’s right. As of the Daily Treasury Statement (DTS) for March 7, the cash balance was down to just $88 billion — meaning that $347 billion of cash has flown out the door since October 24.

And I find that on March 8 alone the Treasury consumed another $22 billion of cash — bringing the balance down to $66 billion! To be sure, there has been no heist at the Treasury Building — other than the normal larceny that is the stock-in-trade of the Imperial City. What’s different this time around is that the bureaucrats have apparently decided to sabotage what they undoubtedly believe to be the usurper in the White House. To this end, they’ve been draining Trump’s bank account rather than borrowing the money to pay Uncle Sam’s monumental bills. This has especially been the case since the January 20 inauguration. The net Federal debt on March 7 was $19.802 trillion — up $237 billion since January 20th. But that’s not the half of it. During that same 47 day period, the Treasury bureaucrats took the opportunity to pay-down $57 billion of maturing treasury bills and notes by tapping its cash hoard.

In all, they drained $294 billion from the Donald’s bank account during that brief period — or about $6.4 billion per day. You wouldn’t be entirely wrong to conclude that even Putin’s alleged world class hackers couldn’t have accomplished such a feat. At this point I could don my tin foil hat because this massive cash drain was clearly deliberate. Last year, for example, during the same 47 day period, the operating deficit was even slightly larger — $253 billion. But the Treasury funded that mainly by new borrowings of $157 billion, which covered 62% of the shortfall. Its cash balance was still $223 billion on March 7. Again, that cash balance is just $66 billion right now. Moreover, the Trump Administration has only a few business days until its credit card expires on March 15 — so it’s also way too late for an eleventh hour borrowing spree to replenish its depleted cash account. (Besides that, I’m predicting a very dangerous market event will start on the 15th.)

We see health as a basic human right. Every society should provide medical care for its citizens at the level it can afford. And, while the United States has made some progress in improving access to care, the results do not justify the costs. So, while we agree with President Trump’s statement that the U.S. health care system should be cheaper, better and universal, the question is how to get there. In this post, we start by setting the stage: where matters stand today and why they are unacceptable. This leads us to the real question: where can and should we go? As economists, we are genuinely partial to market-based solutions that allow individuals to make tradeoffs between quality and price, while competition pushes suppliers to contain costs.

But, in the case of health care, we are skeptical that such a solution can be made workable. This leads us to propose a gradual lowering of the age at which people become eligible for Medicare, while promoting supplier competition. Before getting to the details of our proposal, we begin with striking evidence of the inefficiency of the U.S. health care system. The following chart (from OurWorldInData.org) displays life expectancy at birth on the vertical axis against real health expenditure per capita on the horizontal axis. The point is that the U.S. line in red lies well below the cost-performance frontier established by a range of advanced economies (and some emerging economies, too). Put differently, the United States spends more per person but gets less for its money.

Life Expectancy and Health Expenditure per capita, 1970-2014

It really doesn’t matter how you measure U.S. health care outlays, you will come away with the same conclusion: the U.S. system is extremely inefficient compared to that of other countries. Today, for example, health expenditures account for more than 17% of U.S. GDP. This is more than twice the average of the share in the 42 other countries shown in the figure, and more than 40% higher than the next highest (which happens to be Sweden at 12%).

According to a press release released Friday by the office of Rep. Tulsi Gabbard, Sen. Rand Paul has introduced their bill, the Stop Arming Terrorists Act, in the U.S. Senate. The bipartisan legislation (H.R.608 and S.532) aims to prohibit any federal agency from using taxpayer dollars to provide weapons, cash, intelligence, or any support to al-Qaeda, ISIS, and other terrorist groups. It would also prohibit the government from funneling money and weapons through other countries that are directly or indirectly supporting terrorists.

Gabbard said: “For years, the U.S. government has been supporting armed militant groups working directly with and often under the command of terrorist groups like ISIS and al-Qaeda in their fight to overthrow the Syrian government. Rather than spending trillions of dollars on regime change wars in the Middle East, we should be focused on defeating terrorist groups like ISIS and al-Qaeda, and using our resources to invest in rebuilding our communities here at home.” [..] “The fact that American taxpayer dollars are being used to strengthen the very terrorist groups we should be focused on defeating should alarm every Member of Congress and every American. We call on our colleagues and the Administration to join us in passing this legislation.

Rand Paul provided much-needed support for the bill, stating: “One of the unintended consequences of nation-building and open-ended intervention is American funds and weapons benefiting those who hate us. This legislation will strengthen our foreign policy, enhance our national security, and safeguard our resources.” The legislation is currently co-sponsored by Reps. John Conyers (D-MI); Scott Perry (R-PA); Peter Welch (D-VT; Tom Garrett (R-VA); Thomas Massie (R-KY); Barbara Lee (D-CA); Walter Jones (R-NC); Ted Yoho (R-FL); and Paul Gosar (R-AZ). It is endorsed by Progressive Democrats of America (PDA), Veterans for Peace, and the U.S. Peace Council.

One of Trump’s campaign narratives that resonated deeply with his voter base was an anti-radical Islam agenda, which separated him from Clinton’s campaign as he vowed to “bomb the shit” out of ISIS-controlled oil fields. However, his voter base may or may not be somewhat disillusioned now given that he just approved an arms sale to Saudi Arabia that was so controversial it was even blocked by Obama, a president who made a literal killing from arms sales to the oil-rich kingdom (ISIS adheres to Saudi Arabia’s twisted form of Wahhabist philosophy). In the context of recent events, whether or not the Trump administration will get fully behind Gabbard’s bill remains to be seen. But considering the Trump administration is directly sending American troops to fight in Syrian territory, perhaps the various rebel groups on the ground have outlived their usefulness and the bill will be allowed to proceed unimpeded.

“The first hurdle for the lawsuits will be proving “standing,” which means finding someone who has been harmed by the policy. With so many exemptions, legal experts have said it might be hard to find individuals who would have a right to sue..”

A group of states renewed their effort on Monday to block President Donald Trump’s revised temporary ban on refugees and travelers from several Muslim-majority countries, arguing that his executive order is the same as the first one that was halted by federal courts. Court papers filed by the state of Washington and joined by California, Maryland, Massachusetts, New York and Oregon asked a judge to stop the March 6 order from taking effect on Thursday. An amended complaint said the order was similar to the original Jan. 27 directive because it “will cause severe and immediate harms to the States, including our residents, our colleges and universities, our healthcare providers, and our businesses.” A Department of Justice spokeswoman said it was reviewing the complaint and would respond to the court.

A more sweeping ban implemented hastily in January caused chaos and protests at airports. The March order by contrast gave 10 days’ notice to travelers and immigration officials. Last month, U.S. District Judge James Robart in Seattle halted the first travel ban after Washington state sued, claiming the order was discriminatory and violated the U.S. Constitution. Robart’s order was upheld by the 9th U.S. Circuit Court of Appeals. Trump revised his order to overcome some of the legal hurdles by including exemptions for legal permanent residents and existing visa holders and taking Iraq off the list of countries covered. The new order still halts citizens of Iran, Libya, Syria, Somalia, Sudan and Yemen from entering the United States for 90 days but has explicit waivers for various categories of immigrants with ties to the country.

[..] The first hurdle for the lawsuits will be proving “standing,” which means finding someone who has been harmed by the policy. With so many exemptions, legal experts have said it might be hard to find individuals who would have a right to sue, in the eyes of a court. To overcome this challenge, the states filed more than 70 declarations of people affected by the order including tech businesses Amazon and Expedia, which said that restricting travel hurts their revenues and their ability to recruit employees. Universities and medical centers that rely on foreign doctors also weighed in, as did religious organizations and individual residents, including U.S. citizens, with stories about separated families.

A research note from Goldman Sachs highlights how large, complex and opaque China’s credit market has become over the last decade. In a report called Mapping China’s Credit, analysts Kenneth Ho and Claire Cui write that the rise in China’s total debt started with a RMB 4 trillion ($AU770 billion) stimulus package in 2009 to counter the global financial crisis. Since late 2008, debt to GDP (excluding financial debt) has risen from 158% to 262%. Including financial debt bumps the figure up to 289%. The rise in China’s debt to GDP follows a similar increase in America, where last week bond fund manager Bill Gross discussed the risks associated with the US debt to GDP ratio, which sits at around 350%. The analysts note they’re struggling to break down and make sense of the country’s credit market.

“Given the development of the shadow banking sector, and the introduction of a number of retail investment channels such as wealth management products, it has become much more difﬁcult to analyse and monitor China’s credit growth,” they say. In 2006, 85% of China’s credit was supplied by bank loans (offset by deposits). According to Ho and Cui’s estimates, the share of credit from bank loans has reduced to 53%. In its place, approximately 31% of debt is now supplied through bond and securities markets, and 16% through the shadow banking sector (more on that later). Ho and Cui write that as China’s debt pool has grown, larger state-related companies have seen a significant increase in leverage through traditional loans from state-affiliated banks. In addition, however, a decrease in domestic interest rates has encouraged smaller companies and individual investors to shift savings away from bank deposits.

Let’s take a breather from more consequential money matters at hand midweek to consider the tending moods of our time and place — while a blizzard howls outside the window, and nervous Federal Reserve officials pace the grim halls of the Eccles Building. It is clear by now that we have four corners of American politics these days: the utterly lost and delusional Democratic party; the feckless Republicans; the permanent Deep State of bureaucratic foot-soldiers and errand boys; and Trump, the Golem-King of the Coming Greatness. Wherefore, and what the fuck, you might ask. The Democrats reduced themselves to a gang of sadistic neo-Maoists seeking to eradicate anything that resembles free expression across the land in the name of social justice.

Coercion has been their coin of the realm, and especially in the realm of ideas where “diversity” means stepping on your opponent’s neck until he pretends to agree with your Newspeak brand of grad school neologisms and “inclusion” means welcome if you’re just like us. I say Maoists because just like Mao’s “Red Guard” of rampaging students in 1966, their mission is to “correct” the thinking of those who might dare to oppose the established leader. Only in this case, that established leader happened to lose the sure-thing election and the party finds itself unbelievably out-of-power and suddenly purposeless, like a termite mound without a queen, the workers and soldiers fleeing the power center in an hysteria of lost identity.

They regrouped briefly after the election debacle to fight an imaginary adversary, Russia, the phantom ghost-bear, who supposedly stepped on their termite mound and killed the queen, but, strangely, no actual evidence was ever found of the ghost-bear’s paw-print. And ever since that fact was starkly revealed by former NSA chief James Clapper on NBC’s Meet the Press, the Russia hallucination has vanished from page one of the party’s media outlets — though, in an interesting last gasp of striving correctitude, Monday’s New York Times features a front page story detailing Georgetown University’s hateful traffic in the slave trade two centuries ago. That should suffice to shut the wicked place down for once and for all!

It looks set to be a week packed with big financial milestones. In the US, the Federal Reserve will raise interest rates, putting the country on a path towards getting back to a normal price for money. In the Netherlands, a tense election may deal the fragile eurozone another blow. In this country, Theresa May could finally trigger Article 50, starting the process of taking the UK out of the European Union. The most significant event, however, as is so often the case, may well be something that hardly anyone is paying attention to. On Sunday, Iceland ended capital controls, finally returning its economy to normal after a catastrophic banking collapse back in 2008 and 2009. Why does that matter? Because Iceland was the one country that defied the global consensus and did not bail out its bankers.

True, there was shock to the system. But it was relatively short, and once the pain was dealt with, the country has bounced back stronger than ever. There is, surely, a lesson in that. It might well be better just to let banks go to the wall. Next time around, we should follow Iceland’s example. The crash of 2008 hit every country in the world. And yet none was quite so completely destroyed as Iceland. A tiny country, home to just 323,000 people, with cod fishing and tourism as its two major industries, it deregulated its finance sector and went on a wild lending spree. Its banks started bulking up in a way that might have made Royal Bank of Scotland’s Fred Goodwin start to wonder if his foot wasn’t pressed too hard on the accelerator. When confidence collapsed, those banks were done for.

In every other country in the world, the conventional wisdom dictated the financiers had to be bailed out. The alternative was catastrophe. Cash machines would stop working, trade would grind to a halt, and output would collapse. It would be the 1930s all over again. The state had no option but to dig deep, and pay whatever it took to keep the financial sector alive. But Iceland did not have that option. Its banks had run up debts of $86bn, an impossible sum for an economy with a GDP of $13bn in 2009. Even Gordon Brown, in full “saving the world’” mode, might have baulked at taking on liabilities of that scale. Iceland did the only thing it could do under the circumstances. It let its banks go bust: as British depositors quickly found out to their cost.

Chancellor Angela Merkel derided as “clearly absurd” Turkish President Recep Tayyip Erdogan’s accusation that Germany supports terrorism, as Ankara announced retaliatory measures against the Dutch government amid escalating tensions with Europe. After Erdogan excoriated Merkel’s government for “openly giving support to terrorist organizations” on Monday, the Turkish government announced it would block the Dutch ambassador from re-entering the country. Erdogan has blasted European leaders, including accusing Germany of using “Nazi practices,” after a string of rallies by Turkish ministers on European soil were canceled. “The chancellor has no intention of participating in a competition of provocations” with Erdogan, her chief spokesman, Steffen Seibert, said in an emailed statement on Monday. “She’s not going to join in with that. The accusations are clearly absurd.”

Erdogan is seeking votes from Turkish expatriates in a referendum next month on constitutional changes that would make the presidency his country’s highest authority. He has lashed out at the EU and risked deepening tensions, particularly with Merkel. In an interview on Monday, he said Merkel’s government “mercilessly” supported groups such as the Kurdish PKK group, which has waged a separatist war with the Turkish military for more than three decades. “I don’t want to put all EU countries in the same basket, but some of them can’t stand Turkey’s rise, primarily Germany,” Erdogan told A Haber television. The standoff came to a head over the weekend when the Dutch government prevented Turkish ministers from participating in referendum campaign rallies. Some 3 million Turks outside their country can vote, though fewer than half of them did so in the last general election in 2015.

Merkel struck an unusually strident tone earlier this month, slamming Erdogan for trivializing World War II-era crimes by using a Nazi comparison to censure Germany for canceling ministers’ appearances. Such a tone “can’t be justified,” Merkel said March 6 after Erdogan’s previous outburst. European leaders have been vocal in their disapproval of the referendum, saying the executive-centered system that Erdogan is planning to introduce will concentrate power in the president’s hands at the expense of democracy in a NATO member state and EU membership applicant.

Theresa May’s Brexit bill has cleared all its hurdles in the Houses of Parliament, opening the way for the prime minister to trigger article 50 by the end of March. Peers accepted the supremacy of the House of Commons late on Monday night after MPs overturned amendments aimed at guaranteeing the rights of EU citizens in the UK and giving parliament a “meaningful vote” on the final Brexit deal. The decision came after a short period of so-called “ping pong” when the legislation bounced between the two houses of parliament as a result of disagreement over the issues. The outcome means the government has achieved its ambition of passing a “straightforward” two-line bill that is confined simply to the question of whether ministers can trigger article 50 and start the formal Brexit process.

It had been widely predicted in recent days that May would fire the starting gun on Tuesday, immediately after the vote, but sources quashed speculation of quick action and instead suggested she will wait until the final week of March. MPs voted down the amendment on EU nationals’ rights by 335 to 287, a majority of 48, with peers later accepting the decision by 274 to 135. The second amendment on whether to hold a meaningful final vote on any deal after the conclusion of Brexit talks was voted down by 331 to 286, a majority of 45, in the Commons. The Lords then accepted that decision by 274 to 118, with Labour leader Lady Smith telling the Guardian that continuing to oppose the government would be playing politics because MPs would not be persuaded to change their minds.

“If I thought there was a foot in the door or a glimmer of hope that we could change this bill, I would fight it tooth and nail, but it doesn’t seem to be the case,” she said. But the decision led to tensions between Labour and the Lib Dems, whose leader, Tim Farron, hit out at the main opposition. “Labour had the chance to block Theresa May’s hard Brexit, but chose to sit on their hands. Tonight there will be families fearful that they are going to be torn apart and feeling they are no longer welcome in Britain. Shame on the government for using people as chips in a casino, and shame on Labour for letting them,” he said.

Theresa May has faced down Nicola Sturgeon’s demand for a second referendum on Scottish independence, accusing the SNP leader of “tunnel vision” and rejecting her timetable for a second vote. The prime minister said that the Scottish leader’s plan to hold a second referendum between the autumn of 2018 and spring 2019 represented the “worst possible timing,” setting the Conservative government on a collision course with the administration in Holyrood. The first minister’s intervention had been timed a day ahead of when May had been predicted to trigger article 50, but No 10 later indicated that it would not serve notice to leave the EU until the end of the month. The confirmation of the later date, in the aftermath of the speech, fuelled speculation the prime minister had been unnerved by Sturgeon.

Buoyed by three successive opinion polls putting support for independence at nearly 50/50, Sturgeon said that she had been left with little choice than to offer the Scottish people, who voted to remain in the EU, a choice at the end of the negotiations of a “hard Brexit” or living in an independent Scotland. “The UK government has not moved even an inch in pursuit of compromise and agreement. Our efforts at compromise have instead been met with a brick wall of intransigence,” the first minister said, claiming that any pretence of a partnership of equal nations was all but dead. Downing Street denied that it had ever planned to fire the starting gun on Brexit this week, but critics pointed out that ministers had failed to deny the widespread suggestion in media reports over the weekend. The Guardian understands that May will now wait until the final week of March to begin the process, avoiding a clash with the Dutch elections and the anniversary of the Rome Treaty, and giving the government time to seek consensus in different parts of the country.

Supermarkets in Quebec will now be able to donate their unsold produce, meat and baked goods to local food banks in a program – described as the first of its kind in Canada – that also aims to keep millions of kilograms of fresh food out of landfills. The Supermarket Recovery Program launched in 2013 as a two-year pilot project. Developed by the Montreal-based food bank Moisson Montréal, the goal was to tackle the twin issues of rising food bank usage in the province and the staggering amount of edible food being regularly sent to landfills. Provincial officials said the pilot – which last year saw 177 supermarkets donate more than 2.5m kg of food that would have otherwise been discarded – would now begin expanding across the province.

“The idea behind it is: ‘Hey, we’ve got enough food in Quebec to feed everybody, let’s not be throwing things out,’” Sam Watts, of Montreal’s Welcome Hall Mission, which offers several programs for people in need, told Global News on Friday. “Let’s be recuperating what we can recuperate and let’s make sure we get it to people who need it.” Recent years have seen food bank usage surge across Canada, with children making up just over a third of the 900,000 people who rely on the country’s food banks each month. In Quebec, the number of users has soared by nearly 35% since 2008, to about 172,000 people per month.

The program’s main challenge was in developing a system that would allow products such as meat and frozen foods to be easily collected from grocers and quickly redistributed, said Watts. “There is enough food in the province of Quebec to feed everybody who needs food. Our challenge has always been around management and distribution,” he added. “Supermarkets couldn’t accommodate individual food banks coming to them one by one by one.” More than 600 grocery stores across the province are expected to take part in the program, diverting as many as 8m kg of food per year.

The austerity measures introduced by the government are forcing thousands of taxpayers to hand over inherited property to the state as they are unable to cover the taxation it would entail. The number of state properties grew further last year due to thousands of confiscations that reached a new high. According to data presented recently by Alpha Astika Akinita, real estate confiscations increased by 73 percent last year from 2015, reaching up to 10,500 properties. The fate of those properties remains unknown as the state’s auction programs are fairly limited. For instance, one auction program for 24 properties is currently ongoing. The precise number of properties that the state has amassed is unknown, though it is certain they are depreciating by the day, which will make finding buyers more difficult.

Financial hardship has forced many Greeks to concede their real estate assets to the state in order to pay taxes or other obligations. Thousands of taxpayers are unable to pay the inheritance tax, while others who cannot enter the 12-tranche payment program are forced to concede their properties to the state. Worse, the law dictates that any difference between the obligations due and the value of the asset conceded should not be returned to the taxpayer. The government had announced it would change that law, but nothing has happened to date. Property market professionals estimate that the upsurge in forfeiture of inherited property will continue unabated in the near future as the factors that have generated the phenomenon, such as high unemployment, the Single Property Tax (ENFIA) etc, remain in place.

Past performance is no guide to future returns, as investors are so often told, but the French electorate runs the risk of creating a crisis worse than the fall of Lehman Brothers if it follows the U.K. in instigating a referendum on EU membership, according to analysts at Deutsche Bank. As the French presidential race heats up ahead of the first round of voting in April, the German bank has warned of the pitfalls of using the U.K.’s Brexit vote as a model for a potential “Frexit”, as touted by nationalist candidate Marine Le Pen. Le Pen, who is currently leading the race according to the latest BVA-Salesforce opinion poll, has vowed to hold a French referendum on EU membership if she is successful in winning France’s two-round leadership race.

Pointing to the U.K., which has – so far – felt a relatively benign impact from its Brexit vote, Le Pen has relied on it as a basis for rallying support during her campaigning, saying: “They told us that Brexit would be a catastrophe, that the stock markets would crash … The reality is that none of that happened.” However, Deutsche Bank has warned of the inconsistencies of likening the two votes. An EU referendum in France, one of the founding members of the economic bloc, runs the risk of undermining the euro, the currency shared by 19 of the EU’s 28 member states. “Make no mistake, there is the world of difference between tearing up bilateral and multilateral trade agreements, and, unwinding a monetary union as far reaching in scope as the EMU (economic and monetary union) project,” Deutsche Bank said in a note Tuesday.

“It is the difference between a benign global risk event and something that has the potential to go beyond a ‘Lehman’s moment’.” The frictionless interaction enjoyed by countries within the European Monetary Union would turn into it a “nightmare”, says Deutsche Bank, as a lack of a currency hedge would make all EMU members vulnerable to currency weakness. The bank estimates that assets shared between the economic bloc plus liabilities totaled €46 trillion at the end of the third quarter 2016. This it describes as an “upper bound estimate of EMU exposure that would have no hedge, and be exposed to currency risk in the event of an EMU break-up.”

French foreign policy should be decided solely in Paris, French presidential candidate Marine Le Pen said, calling for a reversal of her country’s quest over past decades for tighter ties with European Union allies. Laying out her foreign-policy vision in a speech in Paris, Le Pen spoke of a world based on nation states that pursue their own interest and preserve their own cultures without interference. “To assure the freedom of the French, there is no price too high too pay,” Le Pen said. “The foreign policy of France will be decided in Paris, and no alliance, no ally, can speak in her place.” Her first move as president would be to renegotiate EU treaties as an initial step toward creating a “Europe of Nations,” she said. She saluted Britain’s vote to leave the EU, and said she’d withdraw from NATO’s military command.

“I rejoice in Europeans claiming back their freedom against the attempts to create an artificial super-state,” she said. “The European Union is not the solution, it’s the problem.” Polls show that Le Pen would win the most votes in the April 23 first round of the elections, but would lose the May 7 run-off against whoever she faces. On the U.S., she said she was hopeful President Donald Trump would reverse what she described as interventionist policies of President Barack Obama. She listed support for rebels in Libya and Syria as “mistakes” that have undermined world peace. “The U.S. is an ally but sometimes an adversary,” she said, adding that she was encouraged by Trump’s early days in office.

She said Russia has an “essential balancing role to keep world peace” and “has been badly treated by the European Union.” In Africa, French policy would be one of “non-intervention, but not indifference.” Le Pen said communism and liberal capitalism have both been delusions, and that “people are trying to escape, and find in the nation the best way to protect themselves. Each country should be free to follow its interests, choose its allies, preserve its culture, and France supports that right for all nations.”

Americans are learning to love the Affordable Care Act, better known as Obamacare. As the law faces possible repeal and replacement by Republicans, a new poll from the Pew Research Center shows that the ACA’s popularity is soaring and has hit its highest point since it was passed. 54% of respondents in Pew’s survey said they approve of the law, with just 43% disapproving. This is better than the 48% approve, 47% disapprove margin from December 2016. Additionally, of the 43% against the law, only 17% of people the total surveyed want Republicans to repeal the way entirely while 25% want the law modified instead, according to Pew.

Every age group, ethnic group, and education level saw increased support for Obamacare between Pew’s current poll and one conducted in October 2016. The result also matches up with other recent polls from a variety of outlets that show President Barack Obama’s signature health law becoming ever-more popular with Americans. House Speaker Paul Ryan said that the GOP plans to introduce a repeal and replace bill for the ACA soon after the week-long President’s Day break. Dissent among Republicans and recent pushback from constituents at town halls, however, has indicated that a repeal may be less than smooth than originally anticipated. Even former GOP House Speaker John Boehner said Thursday that repeal is “not going to happen.”

The unimaginable just happened in Spain: two former bank CEOs, Miguel Blesa (CEO of Caja Madrid) and Rodrigo Rato (CEO of Bankia) were just awarded prison sentences of six years and four-and-a-half years, respectively, for misappropriation of company funds. Rato was also Managing Director of the IMF from 2003 to 2007. He was succeeded by another luminary, Dominique Strauss Kahn. Now, the question on everyone’s mind is will Blesa and Rato actually serve the sentence (more on that later). Dozens more former Caja Madrid senior executives, most of whom are closely connected to either, or both, of the country’s two main political parties and/or unions also face three to six years in prison. They were found guilty by Spain’s National High Court of misusing company credit cards.

Those cards drained money directly from the scarce funds of Caja Madrid, which at the height of Spain’s banking crisis was merged with six other failed savings banks into Bankia, which shortly thereafter collapsed and ended up receiving the biggest bail out in Spanish history, costing taxpayers over €20 billion, to date. Between 2003 and 2012 Caja Madrid (and its later incarnation, Bankia) paid out over €15 million to its senior management and executive directors through its “tarjeta negra” (black card) scheme. According to accounts released by Spain’s bad bank, FROB, much of that money went on restaurants, cash withdrawals, travel and holidays, and the like. The amounts – which did not show up on any bank documents, job contracts, or tax returns – may be small, given the magnitude of the misdeeds that led to the Spanish bank fiasco, but it’s the principle that counts.

Only 4 out of 90 Caja Madrid senior managers, executives, and board members had the basic decency to turn down the offer of undeclared expenses. For the rest, it was an offer they could not refuse. In his last few months at Caja Madrid – just before the whole edifice came crumbling down – Blesa went on a mad spending binge. In one month alone he made purchases on his black card worth €19,000 – more than many Spaniards’ annual salary. This is a man who pocketed over €20 million in salaries and bonuses while at the helm of the bank that he helped destroy. On his departure in 2010, he was awarded a €2.5 million golden parachute. Yet even after his ouster he, like many other Caja Madrid executives, continued making liberal use of his tarjeta negra.

“The unsolvable problem here is that this debt based system is really just an elaborate pyramid scheme predicated on ever increasing amounts of debt in a world where sources of real wealth are finite.”

We live in a world subdivided by societies: nations and their respective subdivisions. As a matter of fact, there are over 200 nations recognized by the United Nations (UN). We are taught that a society must conform to a binary label such as “free” or “unfree”, “democratic” or “non-democratic” and so on. This is done principally for two reasons – to provide a tautological definition, also for easier control of the masses via manipulation. The current overarching narrative provides that we are divided between the “western” and “eastern” worlds. What does this really mean? We can distill this down to one principal root: economics. What do we mean by economics? We can say that in it’s purest form, it is simply the structured allocation of finite resources.

Today we are observing the transition from a so called unipolar world, one in which a single nation (or group of allied nations) dictates the terms of life for all global citizens, to a more balanced and natural multipolar world. The current dominating group, the “western” bloc of nations, is led by the United States along with numerous vassal states; this order has persisted since the end of the Second World War. This construct is held together using a combination of supranational organizations (UN,WTO,World Bank, IMF, et cetera), propaganda (mainstream media complex), armed might (MIC,NATO, private mercenary forces) and chiefly economics (central banks, corporations). The true “rulers” of this bloc are a cabal of very wealthy and powerful oligarchs that work in the background (shadow banking, dark pool finance, shadow governments, think tanks, NGO’s) to subvert the various sovereignties to their advantage.

These oligarchs are the principal owners of, not just the industries and corporations that front for them, but the governments that rule over the masses. Most importantly this cabal owns the means by which real wealth extraction is carried out: fiat currency, chiefly the “worlds reserve currency”- the United States dollar and it’s derivatives. These currencies are backed not by equitable assets; such as natural resources, precious metals or productive capacities; instead they are backed by the creation of debt. Debt that represents a claim on real assets that virtually all participants in global commerce must pay. How did this cabal come into power? This is a complex question that is subject to many possible answers and interpretations. Briefly, we know from historical fact that a global empire is a central part of this construct, today the United States empire holds that role (previously British, French so on…). This provides the controlling force behind such a cabal.

The privately owned quasi-governmental western central banks are at the heart of this operation. They form the crucial nexus between sovereign governments and the financial world in which they derive their revenue stream, and by extension, their power. The current seat of this construct (United States) was founded as a Constitutional Republic. Unfortunately, the United States Constitution is quite amorphous. Using many acts of legislative, executive and even judicial fiat, this cabal has been able to effectively take over the reigns of the nation. With that feat accomplished, near world domination was made possible. A complex web of regulations, laws, and rules; coupled with a financial system few fully comprehend has been put into place across the west. This became the mechanism by which this “new world order” has been enforced.

The unsolvable problem here is that this debt based system is really just an elaborate pyramid scheme predicated on ever increasing amounts of debt in a world where sources of real wealth are finite. At present, the growth rate and the total amount of debt issuance, is outpacing the extraction rate and amount of available reserves of resources on the planet.

For aspiring journalists, historians, or politically engaged citizens, there are few more productive uses of one’s time than randomly reading through the newsletters of I.F. Stone, the intrepid and independent journalist of the Cold War era who became, in my view, the nation’s first “blogger” even though he died before the advent of the internet. Frustrated by big media’s oppressive corporatized environment and its pro-government propaganda model, and then ultimately blacklisted from mainstream media outlets for his objections to anti-Russia narratives, Stone created his own bi-monthly newsletter, sustained exclusively by subscriptions, and spent 18 years relentlessly debunking propaganda spewing from the U.S. government and its media partners. What makes Stone’s body of work so valuable is not its illumination of history but rather its illumination of the present.

What’s most striking about his newsletters is how little changes when it comes to U.S. government propaganda and militarism, and the role the U.S. media plays in sustaining it all. Indeed, reading through his reporting, one gets the impression that U.S. politics just endlessly replays the same debates, conflicts, and tactics. Much of Stone’s writings, particularly throughout the 1950s and into the 1960s, focused on the techniques for keeping Americans in a high state of fear over the Kremlin. One passage, from August 1954, particularly resonates; Stone explained why it’s impossible to stop McCarthyism at home when — for purposes of sustaining U.S. war and militarism — Kremlin leaders are constantly being depicted as gravely threatening and even omnipotent. Other than the change in Moscow’s ideology — a change many of today’s most toxic McCarthyites explicitly deny — Stone’s observations could be written with equal accuracy today.

[..] Few foreign villains have been vested with omnipotence and ubiquity like Vladimir Putin has been — at least ever since Democrats discovered (what they mistakenly believed was) his political utility as a bogeyman. There are very few negative developments in the world that do not end up at some point being pinned to the Russian leader, and very few critics of the Democratic Party who are not, at some point, cast as Putin loyalists or Kremlin spies. Putin — like al Qaeda terrorists and Soviet Communists before him — is everywhere. Russia is lurking behind all evils, most importantly — of course — Hillary Clinton’s defeat. And whoever questions any of that is revealing themselves to be a traitor, likely on Putin’s payroll.

As The Nation’s Katrina vanden Heuvel put it on Tuesday in the Washington Post: “In the targeting of Trump, too many liberals have joined in fanning a neo-McCarthyite furor, working to discredit those who seek to deescalate U.S.-Russian tensions, and dismissing anyone expressing doubts about the charges of hacking or collusion as a Putin apologist. … What we don’t need is a replay of Cold War hysteria that cuts off debate, slanders skeptics and undermines any effort to explore areas of agreement with Russia in our own national interest.” That precisely echoes what Stone observed 62 years ago: Claims of Russian infiltration and ubiquity are “the thesis no American dare any longer challenge without himself becoming suspect” (Stone was not just cast as a Kremlin loyalist during his life but smeared as a Stalinist agent after he died).

This past September, in one of his regular interviews with the newspaper Parlamentní Listy, retired Czech Major General Hynek Blasko commented on the possibility of a conflict between Russia and NATO with a following anecdote: “I have seen a popular joke on the Internet about Obama and his generals in the Pentagon debating on the best timing to attack Russia. They couldn’t come to any agreement, so they decided to ask their allies. The French said: ” We do not know, but certainly not in the winter. This will end badly. ” The Germans responded: “We do not know, either, but definitely not in a summer. We have already tried.” Someone in Obama’s war room had a brilliant idea to ask China, on the basis that China is developing and always has new ideas.

The Chinese answered: “The best time for this is right now. Russia is building the Power of Siberia pipeline, the North Stream Pipeline, Vostochny Cosmodrome Spaceport, the MegaProject bridge to Crimea; also Russian is upgrading the Trans-Siberian railroad with a new railway bridge across Lena River and the Amur-Yakutsk Mainline. Russia is also building new sports facilities for the World Cup and athletics, and has in development over 150 production projects in the Arctic … Well, now they really need as many POWs as possible!” So, now, even NATO members’ generals have noticed something peculiar about Russia. According to the myth that is being peddled by Western media, Russia has an underdeveloped economy based on the exchange of raw mineral resources for glass beads… I mean Western produced hi-tech products. Any barber would tell you that even Asians can make iPhones, but Russians can’t.

When I was leader of the opposition, concerned about the standing of our politicians and failing confidence in our political processes, John Howard used to chip me about the need to recognise politics as a “profession”, and politicians as “professionals”. Now, some 25 years on, the dissatisfaction with our career politicians and the political system is of paramount importance, and fundamental to the drift away from the major parties, whereby now almost one in three direct their votes elsewhere. Politics has become a daily “conflict game”, dominated by career politicians concentrated on winning points on the other side, rather than on developing and delivering good public policy, and good government.

Important issues have been left to drift, or in some cases have been compounded by short-term, populist responses, so that important problems remain unresolved, all having a negative impact on the wellbeing of the average voter, let alone the legacies being left to their children. Minor parties and independents are attracting support in protest, or in the now desperate hope that they will at least shake things up, perhaps even drive governments and oppositions to better economic and social outcomes. But they too are mostly opportunistic, and populist, and often “extreme”, knowing they will never be in a position to have to deliver. Moreover, without experience and the requisite skills, they too may soon be “absorbed” or “defeated” by the system. Unfortunately, the skill sets and experience required of a career politician essentially make them incompetent to govern effectively.

Their career path is often from university, community or union politics, through local government/party engagement, perhaps serving as a ministerial staffer, to pre-selection, then election, and so on. Politics has become the end in itself. Those that make it are mostly qualified just to play the “game”, but not to govern. Increasingly, fewer have ever had a “real job”, or a significant career, before entering politics, and even then that may not qualify them to be a competent minister. It is also not easy to come from outside, as both Trump and Turnbull are finding. Yet, many end up as ministers responsible for significant government portfolios, and large budgets, with little or no relevant experience or skills or commitment to that area, let alone in management. Clearly, if we were to advertise the ministerial posts to attract those with the necessary competence – with the abilities, commitments, knowledge, experience and skills to do the job well – very few indeed, if any, of the current lot would be appointed.

Two Turkish servicemen believed to have been involved in the plot to assassinate Turkish President Recep Tayyip Erdogan during the July coup attempt in the neighboring country, are being held in custody in Alexandroupoli, it was revealed Thursday. The two men, former members of Turkey’s special forces, entered Greece illegally through the Evros border crossing a few days ago and turned themselves in to police authorities in Orestiada. Through a local lawyer, the two commandos applied for political asylum on February 20.They had eluded arrest for months until they entered Greece. The pair are believed to have told Greek investigators that they were indeed involved in a plot to assassinate Erdogan. So far, there has been no Turkish request for their extradition.

Meanwhile, Ankara has submitted a fresh extradition request for the eight Turkish servicemen who Ankara have accused of being involved in the coup attempt. The initial request for their extradition was rejected in January by Greece’s Supreme Court, which said that regardless of whether they were guilty or not, the servicemen would not receive a fair trial in Turkey. In the new request, Ankara provided reassurances that they would receive a fair trial. It also includes what Turkish authorities describe as new incriminating evidence. The request sent to the Greek Foreign Ministry further includes two additional charges, on top of the four included in the first extradition request. The Foreign Ministry has passed on the request to the Justice Ministry.

A new report from the International Union for Conservation of Nature (IUCN) has found that as much as 31 percent of the estimated 9.5 million tonnes of plastic that enters the ocean annually could be from sources such as tires and synthetic clothing. These products can release “primary microplastics”, which are plastics that directly enter the environment as “small particulates”. According to the IUCN, which released the report on Wednesday, they come from a range of sources. These include synthetic textiles, which deposit them due to abrasion when washed, and tires, which release them as a result of erosion when driving.

The report identified seven “major sources” of primary microplastics: Tires, synthetic textiles, marine coatings, road markings, personal care products, plastic pellets and city dust. “Our daily activities, such as washing clothes and driving, significantly contribute to the pollution choking our oceans, with potentially disastrous effects on the rich diversity of life within them, and on human health,” Inger Andersen, director general of the IUCN, said in a statement on Wednesday. “These findings indicate that we must look far beyond waste management if we are to address ocean pollution in its entirety,” he added.

Nearly 10 years after a “doomsday” seed vault opened on an Arctic island, some 50,000 new samples from seed collections around the world have been deposited in the world’s largest repository built to safeguard against wars or natural disasters wiping out global food crops. The Svalbard Global Seed Vault, a gene bank built underground on the isolated island in a permafrost zone some 1,000 kilometers (620 miles) from the North Pole, was opened in 2008 as a master backup to the world’s other seed banks, in case their deposits are lost. The latest specimens sent to the bank, located on the Svalbard archipelago between mainland Norway and the North Pole, included more than 15,000 reconstituted samples from an international research center that focuses on improving agriculture in dry zones.

They were the first to retrieve seeds from the vault in 2015 before returning new ones after multiplying and reconstituting them. The specimens consisted of seed samples for some of the world’s most vital food sources like potato, sorghum, rice, barley, chickpea, lentil and wheat. Speaking from Svalbard, Aly Abousabaa, the head of the International Center for Agricultural Research, said Thursday that borrowing and reconstituting the seeds before returning them had been a success and showed that it was possible to “find solutions to pressing regional and global challenges.” The agency borrowed the seeds three years ago because it could not access its gene bank of 141,000 specimens in the war-torn Syrian city of Aleppo, and so was unable to regenerate and distribute them to breeders and researchers.

“The reconstituted seeds will play a critical role in developing climate-resilient crops for generations,” Abousabaa said.The 50,000 samples deposited Wednesday were from seed collections in Benin, India, Pakistan, Lebanon, Morocco, Netherlands, the U.S., Mexico, Bosnia and Herzegovina, Belarus and Britain. It brought the total deposits in the snow-covered vault — with a capacity of 4.5 million — to 940,000.

Australia’s plan to rescue the beleaguered Great Barrier Reef has been set back at least two decades after the fragile ecosystem suffered its worst-ever bleaching last year, experts said Friday. The vast coral reef – which provides a tourism boon for Australia – is under pressure from agricultural run-off, the crown-of-thorns starfish, development and climate change. Last year swathes of coral succumbed to devastating bleaching, due to warming sea temperatures, and the reef’s caretakers have warned it faces a fresh onslaught in the coming months. Canberra updated the UN’s World Heritage committee on its “Reef 2050” rescue plan in December, insisting the site was “not dying” and laying out a strategy for incremental improvements to the site.

But an independent report commissioned by the committee concluded that the government had little chance of meeting its own targets in the coming years, adding that the “unprecedented” bleaching and coral die-off in 2016 was “a game changer”. “Given the severity of the damage and the slow trajectory of recovery, the overarching vision of the 2050 Plan… is no longer attainable for at least the next two decades,” the report said. Last year’s bleaching killed two-thirds of shallow-water corals in the north of the 2,300-kilometre (1,400-mile) long reef, although central and southern areas escaped with less damage. The government has pledged more than Aus$2.0 billion (US$1.5 billion) to protect the reef over the next decade, but researchers noted a lack of available funding, with many of the plan’s actions under-resourced.

An excellent discussion to have. However, opinions and interpretations already vary enormously, and it’s Trump who will appoint the next Supreme Court judge(s) – first one today. That could well take it from a showdown to a constitutional crisis.

Did President Donald Trump’s executive order on immigration ban Muslims from the country on the basis of their religion? That will be a central question when federal judges dig more deeply into the constitutionality of the order, signed on Jan. 27. If the answer is yes, it appears vulnerable to a First Amendment challenge. So far, four U.S. district judges – in Brooklyn, New York; Boston; Alexandria, Virginia; and Seattle – have issued temporary rulings blocking aspects of the order. These provisional, hastily granted judicial rulings didn’t delve into deep constitutional issues. Instead, they sought to prevent deportations or other government actions that would harm individuals affected by it. Lawyers for those individuals will return to court in coming days to flesh out their arguments. The Trump administration presumably will send attorneys from the Justice Department to defend the executive order, and the respective judges will subsequently issue more-thorough rulings.

[..] Strange as it may seem, Trump’s utterances on Twitter or elsewhere could become evidence in court of what he intended to accomplish with the executive order. Some possible examples include his original call during the presidential campaign for a “total and complete shutdown of Muslims entering the United States” and his modified demand for a ban targeting immigrants from majority-Muslim countries. Even some conservative Republicans expressed unease about the constitutionality of the Trump order. Focusing on the First Amendment issue, Senate Majority Leader Mitch McConnell said on ABC’s “This Week” on Sunday: “It’s hopefully going to be decided in the courts as to whether or not this has gone too far.” “I think we need to be careful,” McConnell added. “We don’t have religious tests in this country.”

Roger Pilon, founding director of the Cato Institute’s Center for Constitutional Studies, predicted the debate over Trump’s immigration order would ultimately end up with the Supreme Court. “I don’t see President Trump backing down,” he said. “I do hope, however, that the stays the lower courts are issuing will allow for a measure of ‘business as usual,’ because the initial situation seems very chaotic.”

Accusing her of betrayal and insubordination, President Donald Trump on Monday fired Sally Yates, the acting attorney general of the United States and a Democratic appointee, after she publicly questioned the constitutionality of his controversial refugee and immigration ban and refused to defend it in court. The dramatic public clash between the new president and the nation’s top law enforcement officer laid bare the growing discord and dissent surrounding Trump’s executive order, which temporarily halted the entire U.S. refugee program and banned all entries from seven Muslim-majority nations for 90 days. The firing came hours after Yates directed Justice Department attorneys not to defend the executive order, saying she was not convinced it was lawful or consistent with the agency’s obligation “to stand for what is right.”

[..] Yates’s abrupt decision reflected the growing conflict over the executive order, with administration officials moving Monday to distance themselves from the policy. As protests erupted at airports over the weekend and confusion disrupted travel around the globe, even some of Trump’s top advisers and fellow Republicans made clear they were not involved in crafting the policy or consulted on its implementation. At least three top national security officials — Defense Secretary Jim Mattis, Homeland Security Secretary John Kelly and Rex Tillerson, who is awaiting confirmation to lead the State Department — have told associates they were not aware of details of the directive until around the time Trump signed it. Leading intelligence officials were also left largely in the dark, according to U.S. officials.

Tennessee Sen. Bob Corker, the top Republican on the Senate Foreign Relations committee, said that despite White House assurances that congressional leaders were consulted, he learned about the order in the media. Trump’s order pauses America’s entire refugee program for four months, indefinitely bans all those from war-ravaged Syria and temporarily freezes immigration from Iraq, Syria, Iran, Sudan, Libya, Somalia and Yemen. Federal judges in New York and several other states issued orders that temporarily block the government from deporting people with valid visas who arrived after Trump’s travel ban took effect and found themselves in limbo. Yates, who was appointed deputy attorney general in 2015 and was the No. 2 Justice Department official under Loretta Lynch, declared Monday she was instructing department lawyers not to defend the order in court.

“I am responsible for ensuring that the positions we take in court remain consistent with this institution’s solemn obligation to always seek justice and stand for what is right,” Yates wrote in a letter announcing her position. “At present, I am not convinced that the defense of the Executive Order is consistent with these responsibilities nor am I convinced that the Executive Order is lawful.” [..] Mattis, who stood next to Trump during Friday’s signing ceremony, is said to be particularly incensed. A senior U.S. official said Mattis, along with Joint Chiefs Chairman Joseph Dunford, was aware of the general concept of Trump’s order but not the details. Tillerson has told the president’s political advisers that he was baffled over not being consulted on the substance of the order.

In 2004, Philip Roth published “The Plot Against America.” The four main characters of the novel, which takes place between June, 1940, and October, 1942, are a family of American Jews, the Roths, of Newark—Bess, Herman, and their two sons, Philip and Sandy. They are ardent supporters of Franklin Delano Roosevelt, but, in Roth’s reimagining, Roosevelt loses his bid for a third term to a surprise Republican candidate—the aviator Charles Lindbergh—whose victory upends not only politics in America but life itself. The historical Lindbergh was an isolationist who espoused a catchphrase that Donald Trump borrowed for his Presidential campaign, and for his Inaugural Address: “America First.” The fictional Lindbergh, like the actual Trump, expressed admiration for a murderous European dictator, and his election emboldened xenophobes.

In Roth’s novel, a foreign power—Nazi Germany—meddles in an American election, leading to a theory that the President is being blackmailed. In real life, U.S. intelligence agencies are investigating Trump’s ties to Vladimir Putin and the possibility that a dossier of secret information—kompromat—gives Russia leverage with his regime. Roth wrote in the Times Book Review that “The Plot Against America” was not intended as a political roman à clef. Rather, he wanted to dramatize a series of what-ifs that never came to pass in America but were “somebody else’s reality”—i.e., that of the Jews of Europe. “All I do,” he wrote, “is to defatalize the past—if such a word exists—showing how it might have been different and might have happened here.”

Last week, Roth was asked, via e-mail, if it has happened here. He responded, “It is easier to comprehend the election of an imaginary President like Charles Lindbergh than an actual President like Donald Trump. Lindbergh, despite his Nazi sympathies and racist proclivities, was a great aviation hero who had displayed tremendous physical courage and aeronautical genius in crossing the Atlantic in 1927. He had character and he had substance and, along with Henry Ford, was, worldwide, the most famous American of his day. Trump is just a con artist. The relevant book about Trump’s American forebear is Herman Melville’s ‘The Confidence-Man,’ the darkly pessimistic, daringly inventive novel—Melville’s last—that could just as well have been called ‘The Art of the Scam.’ ”

American reality, the “American berserk,” Roth has noted, makes it harder to write fiction. Does Donald Trump outstrip the novelist’s imagination? Roth replied, “It isn’t Trump as a character, a human type—the real-estate type, the callow and callous killer capitalist—that outstrips the imagination. It is Trump as President of the United States. “I was born in 1933,” he continued, “the year that F.D.R. was inaugurated. He was President until I was twelve years old. I’ve been a Roosevelt Democrat ever since. I found much that was alarming about being a citizen during the tenures of Richard Nixon and George W. Bush. But, whatever I may have seen as their limitations of character or intellect, neither was anything like as humanly impoverished as Trump is: ignorant of government, of history, of science, of philosophy, of art, incapable of expressing or recognizing subtlety or nuance, destitute of all decency, and wielding a vocabulary of seventy-seven words that is better called Jerkish than English.”

At the dawn of the twentieth century, when President Teddy Roosevelt governed the country on a platform of trust busting aimed at reducing corporate power, even he could not bring himself to bust up the banks. That was a mistake born of his collaboration with the financier J.P. Morgan to mitigate the effects of the Bank Panic of 1907. Roosevelt feared that if he didn’t enlist the influence of the country’s major banker, the crisis would be even longer and more disastrous. It’s an error he might not have made had he foreseen the effect that one particular investment bank would have on America’s economy and political system.

There have been hundreds of articles written about the “world’s most powerful investment bank,” or as journalist Matt Taibbi famously called it back in 2010, the “great vampire squid.” That squid is now about to wrap its tentacles around our world in a way previously not imagined by Bill Clinton or George W. Bush. No less than six Trump administration appointments already hail from that single banking outfit. Of those, two will impact your life strikingly: former Goldman partner and soon-to-be Treasury Secretary Steven Mnuchin and incoming top economic adviser and National Economic Council Chair Gary Cohn, former president and “number two” at Goldman. (The Council he will head has been responsible for “policy-making for domestic and international economic issues.”)

Now, let’s take a step into history to get the full Monty on why this matters more than you might imagine. In New York, circa 1932, then-Governor Franklin Delano Roosevelt announced his bid for the presidency. At the time, our nation was in the throes of the Great Depression. Goldman Sachs had, in fact, been one of the banks at the core of the infamous crash of 1929 that crippled the financial system and nearly destroyed the economy. It was then run by a dynamic figure, Sidney Weinberg, dubbed “the Politician” by Roosevelt because of his smooth tongue and “Mr. Wall Street” by the New York Times because of his range of connections there. Weinberg quickly grasped that, to have a chance of redeeming his firm’s reputation from the ashes of public opinion, he would need to aim high indeed. So he made himself indispensable to Roosevelt’s campaign for the presidency, soon embedding himself on the Democratic National Campaign Executive Committee.

Goldman Sachs CEO Lloyd Blankfein became the first major Wall Street leader to speak out against President Donald Trump’s order to halt arrivals from several Muslim-majority countries. In a voicemail to employees on Sunday, Blankfein said diversity was a hallmark of Goldman’s success, and if the temporary freeze became permanent, it could create “disruption” for the bank and its staff. “This is not a policy we support, and I would note that it has already been challenged in federal court, and some of the order has been enjoined at least temporarily,” Blankfein said, according to a transcript seen by Reuters. In Silicon Valley, the heads of companies such as Apple and Facebook swiftly denounced Trump’s immigration ban.

But the rest of corporate America has been more circumspect in speaking out, underscoring the sensitivities around opposing policies that could provoke a backlash from the White House. Tepid responses from many of Blankfein’s peers made his comments all the more potent, especially because Goldman has gotten attention for the number of its alumni who have joined Trump’s administration. Top BlackRock executives including CEO Larry Fink, sent a memo to staff on Monday saying Trump’s order presented “challenges” to its goals of diversity and inclusion. BlackRock is examining the direct impact on its employees, as well as the broader implications of the order, they said. “We, of course, all want to promote security and combat terrorism, but we believe it needs to be done with respect for due process, individual rights and the principle of inclusion,” they wrote.’

As Republicans seek to carry out their promise to repeal the Affordable Care Act (ACA), they must keep an eye on their own political health. “Obamacare” may be unpopular, but its components are not. A celebrated part of the law bans insurers from turning away customers who have pre-existing medical conditions. Before the ACA, insurers would routinely deny coverage to those with even minor or old blots on their medical histories. At a recent question-and-answer session, Paul Ryan, the Speaker of the House of Representatives, was confronted by a man who, thanks to a cancer diagnosis, owed his life to this Obamacare rule. Mr Ryan promised the voter that the GOP’s desired ACA overhaul would not have left him for dead. Instead, he could have joined a “high-risk pool”. Beloved by the right, these pools feature in almost every Obamacare alternative, including the one penned by Tom Price, Donald Trump’s pick to be health secretary.

The idea is to hive unhealthy people off into their own dedicated market and then subsidise their coverage. It reverses the logic of the ACA, which lumped everyone together to spread costs around. The law sent premiums skyrocketing for healthy folk who buy their insurance themselves, rather than through an employer. Whittling out higher-risk people from the market would bring those premiums back down. Middle-income earners too well-off to qualify for Obamacare’s tax credits, who have suffered the most from higher costs, would surely cheer such a reform. 35 states ran high-risk pools before the ACA. The biggest and most successful was the Minnesota Comprehensive Health Association (MCHA, or “em-sha”). Established in 1976, MCHA covered 27,000 Minnesotans with pre-existing conditions in 2011, about 10% of the relevant market. It offered a selection of plans, from near-total coverage to catastrophe-only insurance.

All provided good, though not unlimited, care. Separating high-risk people out does not make their costs disappear. Minnesota paid for MCHA in two ways. First, premiums were up to 25% higher than elsewhere. After those were collected, a levy on other health insurance plans covered its losses. This tax inflated healthy folks’ premiums much less than Obamacare does, partly because it applied to a broad base which included employer-provided coverage. MCHA helped create a stable market, argues Peter Nelson of the Centre of the American Experiment, a conservative think-tank. The ACA, by contrast, has led to something of a mess. In 2015 insurers’ costs were 16% higher than their revenue from premiums. Blue Cross Blue Shield, an insurer which covered 103,000 people, has left Minnesota’s market, blaming massive losses. The state is likely to hand out $300m to cushion the blow from huge premium increases for 2017, which by one measure reached 59%.

Twenty U.S. banks with less than $250 billion in assets will be freed from the subjective portion of the Federal Reserve’s annual stress tests under changes the central bank laid out Monday. Banks including Northern Trust and American Express will no longer have to comply with the “qualitative” half of the Fed’s stress tests, which takes a deep dive into a firm’s risk-management systems. Last year, 33 banks participated in the annual exercise. The central bank said it would release scenarios and instructions for the 2017 test by the end of this week. Stress tests have become a centerpiece of the Fed’s postcrisis regulatory framework.

The exercise examines two critical aspects of the largest firms: first, whether banks hold enough capital—money raised from investors or earned through profit—to withstand severe economic stress in the financial system, and second, whether banks have the appropriate internal processes to identify and measure risk when considering their own capital planning. The Fed can reject a bank’s plan to pay out shareholders on either basis. To gain an exemption, a firm must have assets between $50 billion and $250 billion and not be identified as a globally systemically important bank. One important change made by regulators in the final rule was excluding a requirement to have less than $10 billion in foreign exposure.

Those firms will still be required to show regulators they could survive a hypothetical recession with enough capital to continue lending. The change is designed to make the tests less onerous, while allowing the Fed to dedicate more of its staff to focusing on the biggest firms. The 2010 Dodd-Frank financial-overhaul law requires banks with more than $50 billion in assets to undergo the yearly stress tests. Fed officials have been looking for ways to ease requirements for regional banks while raising capital requirements for large, globally systemically important banks by adding a capital surcharge into the stress tests.

Ever since the European Commission and ECB jointly decided that Italy’s government could bend EU banking rules out of all recognition in order to bail out the country’s third largest bank, Monte dei Paschi di Siena, Europe’s financial stocks have been on a tear. But the good times were brought to a grinding halt Monday after Italy’s largest bank, Unicredit, which employs 55,000 people in 17 countries, announced losses for 2016 of €11.8 billion. By the bank’s logic, it would have announced profits if it hadn’t had to write off €12.2 billion, including billions of euros of non-performing loans (NPLs) festering on its balance sheets. But it got worse. In the registration document for its pending recapitalization, published on its website today, Unicredit also announced that its capital ratios at the end of 2016 might fall short of ECB requirements.

It was enough to prompt a 5.45% slide in its shares. As detected in the ECB’s latest stress test, Unicredit already had the slimmest capital buffer of all Europe’s Global Systemically Important Banks (G-SIBs). And it just got slimmer. The reality today is not comforting: a bank that is officially too big to fail, with over €1 trillion of “assets” on its books, just admitted that things are even worse than initially feared. Somehow, Unicredit will need to raise €13 billion in new capital by the end of June. If successful, it would be the biggest capital expansion of Italian stock market history. Earlier this month, the bank has pushed through a 10:1 reverse stock split, cutting its shares outstanding by a factor of 10 and multiplying the share price by 10. So its shares today plunged 5.45% to €26.20 instead of to, say, €2.62.

It makes the shares look more palatable, but it does absolutely nothing to bank’s market capitalization, which is down to just €16.2 billion. The bank is also planning to cut 14,000 jobs by 2019, close 944 of its 3,800 branches, and offload almost €18 billion of bad loans — a gargantuan ask even at the best of times. And for Unicredit and Italy as a whole, these are most certainly not the best of times. The Italian government has so far pledged €20 billion of taxpayer funds to partially bail out the bondholders of Monte dei Paschi and of a clutch of other banks that will probably include Banca Popolare di Vicenza, Veneto Banca and Genoa-based Carige. That’s already four times the initial estimated outlay of €5 billion. Expect it to keep growing.

The mindlessness is unbearable. Amnesty International tells us that we must “fight the Muslim ban” because Trump’s bigotry is wrecking lives. Anthony Dimaggio at CounterPunch says Trump should be impeached because his Islamophobia is a threat to the Constitution. This is not to single out these two as the mindlessness is everywhere among those whose worldview is defined by Identity Politics. One might think that Amnesty International should be fighting against the Bush/Cheney/Obama regime wars that have produced the refugees by killing and displacing millions of Muslims. For example, the ongoing war that Obama inflicted on Yemen results in the death of one Yemeni child every 10 minutes, according to UNICEF. Where is Amnesty International?

Clearly America’s wars on Muslims wreck far more lives than Trump’s ban on immigrants. Why the focus on an immigration ban and not on wars that produce refugees? Is it because Obama is responsible for war and Trump for the ban? Is the liberal/progressive/left projecting Obama’s monstrous crimes onto Trump? Is it that we must hate Trump and not Obama? Immigration is not a right protected by the US Constitution. Where was Dimaggio when in the name of “the war on terror” the Bush/Obama regime destroyed the civil liberties guaranteed by the US Constitution? If Dimaggio is an American citizen, he should try immigrating to the UK, Germany, or France and see how far he gets.

The easiest and surest way for the Trump administration to stop the refugee problem, not only for the US but also for Europe and the West in general, is to stop the wars against Muslim countries that his predecessors started. The enormous sums of money squandered on gratuitous wars could instead be given to the countries that the US and NATO have destroyed. The simplest way to end the refugee problem is to stop producing refugees. This should be the focus of Trump, Amnesty, and Dimaggio. Is everyone too busy hating to do anything sensible? It is very disturbing that the liberal/progressive/left prefers to oppose Trump than to oppose war. Indeed, they want a war on Trump. How does this differ from the Bush/Obama war on Muslims?

Just one week in office, President Trump is already following through on his pledge to address illegal immigration. His January 25th executive order called for the construction of a wall along the entire length of the US-Mexico border. While he is right to focus on the issue, there are several reasons why his proposed solution will unfortunately not lead us anywhere closer to solving the problem. First, the wall will not work. Texas already started building a border fence about ten years ago. It divided people from their own property across the border, it deprived people of their land through the use of eminent domain, and in the end the problem of drug and human smuggling was not solved.

Second, the wall will be expensive. The wall is estimated to cost between 12 and 15 billion dollars. You can bet it will be more than that. President Trump has claimed that if the Mexican government doesn’t pay for it, he will impose a 20% duty on products imported from Mexico. Who will pay this tax? Ultimately, the American consumer, as the additional costs will be passed on. This will of course hurt the poorest Americans the most. Third, building a wall ignores the real causes of illegal border crossings into the United States. Though President Trump is right to prioritize the problem of border security, he misses the point on how it can be done effectively and at an actual financial benefit to the country rather than a huge economic drain.

The solution to really addressing the problem of illegal immigration, drug smuggling, and the threat of cross-border terrorism is clear: remove the welfare magnet that attracts so many to cross the border illegally, stop the 25 year US war in the Middle East, and end the drug war that incentivizes smugglers to cross the border. [..] the threat of terrorists crossing into the United States from Mexico must be taken seriously, however once again we must soberly consider why they may seek to do us harm. We have been dropping bombs on the Middle East since at least 1990. Last year President Obama dropped more than 26,000 bombs. Thousands of civilians have been killed in US drone attacks. The grand US plan to “remake” the Middle East has produced only misery, bloodshed, and terrorism. Ending this senseless intervention will go a long way toward removing the incentive to attack the United States.

It’s like a different planet. Curious detail is that western Canada always felt very close to the US, something that comes up every time Québec separation is discussed. Those same people now actively sponsor refugees. Bless you.

After the success of last year’s resettlements in Calgary, another wave of refugees could be on its way as the federal government and immigration services monitor the impact of Donald Trump’s refugee ban. And while Prime Minister Justin Trudeau has already suggested Canada will welcome those the U.S. won’t take, immigration advocates say funding for services will have to keep up with rising demand. “There is a lot of confusion around the ban right now, it came down very fast and furious,” said Anoush Newman, community engagement coordinator for the Calgary Catholic Immigration Society. “But Canada is in a very respected position in the world. And people from a lot of countries will aspire to come here.”

Fariborz Birjandian, CEO with CCIS, added that while Calgary’s numbers will increase only if the federal government approves another wave of Syrian refugees similar to last year’s, the possibility is there amid the ban in the U.S. – a country that normally takes in 80,000 refugees a year. “There are hundreds of thousands of refugees in camps right now, dreaming of coming to Canada,” Birjandian said. “But that all depends on whether the federal government will raise its target numbers.” CCIS estimates up to 7,000 refugees arrived in Alberta over the past year, up to 3,400 of them to Calgary, after the Trudeau government announced a goal of taking at least 25,000 refugees last January.

[..] if Canadian cities will be expected to prepare for more refugees, Newman says the federal government also needs to ensure funding for new infrastructure and support services. “When they arrive here, they need schools, health services, language services. We need to make sure they get enough support,” she said. CCIS officials held a public forum Monday updating the community about its refugee resettlement program one year after the Trudeau government announced its 25,000 target. Birjandian commended local efforts, especially among private sponsors who took in up to 2,200 of Calgary’s 3,400 total refugees.

The death Monday of a third migrant within a week at the Moria camp on Lesvos has increased concerns about the living conditions of thousands of people who continue to live in tents, and cast fresh doubts over a pledge by the Migration Ministry in early January to take the necessary precautions as heavy snowfall and subzero temperatures engulfed the country. However, Migration Minister Yiannis Mouzalas said Monday that the number of United Nations refugee agency (UNHCR) employees at the camps has dropped, making a difficult situation even tougher. He also said a plan to move people to hotels while the so-called hot spots received a makeover fell through after local authorities and hoteliers disagreed. He vowed to reporters that steps will be taken “to make the situation more manageable,” while migrants, meanwhile, say they are at breaking point.

The latest incidents occurred as the UNHCR and other organizations have called on Greece to improve living conditions. The man who died Monday in his tent was a Pakistani national, aged between 18 and 20. Authorities have ruled out foul play while doctors blamed carbon monoxide poisoning. A 30-year-old Afghan man who shared the same tent was hospitalized but his condition was reportedly not life-threatening. The Pakistani man’s death follows that of an Egyptian man, 22, last Tuesday and a 46-year-old Syrian man on Saturday. A coroner has asked for more tests to ascertain the cause of death for the latter two. Initial assessments attributed their deaths to fume inhalations from stoves they had lit to keep warm. Two camps on Lesvos serve as temporary shelter for some 4,800 refugees and migrants.